Panama: Suspension of Corporate Rights

Published on Apr 29, 2025

 

Did you know that the so-called "corporate rights” of your legal entity organized in Panama can be "suspended”? In this article, Denise Littman and Vanessa Muentes from ARIAS Panama, explain what the suspension of these rights means, the causes that can trigger it, the legal effects it entails, and the measures that can be taken to remedy the situation. 

 

CAUSES OF SUSPENSION OF CORPORATE RIGHTS 

 

The causes for suspension outlined in the current regulations of Panama are the following: 

 

Absence of Resident Agent: 

• A legal entity that remains without a resident agent for more than ninety (90) calendar days after the resignation, removal, or termination of the previous agent will be subject to suspension of its corporate rights. 

 

Failure to Pay the Franchise Tax 

• Legal entities that fail to pay the corresponding franchise tax (Tasa Única) for three consecutive years, following an order from the General Directorate of Revenues. 

 

Failure to Fulfill Legal Obligations: 

• Legal entities that fail to comply with obligations under laws that explicitly provide for the suspension of corporate rights as a penalty. Failure to comply with the legal obligations of a legal entity within three months after the deadline for compliance will be subject to compulsory administrative liquidation, by order of the competent authority. 

The following laws establish legal obligations that, if not met, can result in the suspension of the legal entity: 

o Law 23 of April 27, 2015, which adopts measures to prevent Money Laundering, Terrorist Financing, and Proliferation of Weapons of Mass Destruction Financing. 

a. Due Diligence: The Resident Agent must apply all necessary measures to obtain the Due Diligence documentation of the legal entity. 

b. Record Keeping: The Resident Agent must keep all records of information related to due diligence up to date and safeguard this information for a minimum of five years after the commercial relationship ends. 

 

o Law 52 of October 27, 2016, which establishes the obligation to maintain accounting records for "offshore” legal entities. 

a. Maintaining Accounting Records: Any legal entity that does not conduct its commercial activities within Panama must keep accounting records and supporting documentation for a minimum of five years, starting from the last day of the calendar year in which the transactions were made. 

b. Annual Submission of Records and Notification of Record Custodians: Legal entities not conducting commercial activities within Panama must annually submit their accounting records or copies to the resident agent by April 30, for the fiscal period ending on December 31 of the previous year. If the accounting records are kept outside the resident agent's office, the legal entity must inform the agent in writing about who holds the records and their location. Any changes to this information must be notified immediately. 

c. Compliance with Authorities' Requirements: Legal entities must provide any supporting documentation required by the competent authority within the requested timeframe. 

 

o Law 129 of March 17, 2020, which establishes the Unique Private System for the Registration of Beneficial Owners. 

a. Beneficial Owner Registration by the Resident Agent: Every legal entity is required to provide its Resident Agent with all the necessary information to identify the beneficial owner of the entity. The Resident Agent is then obligated to include this information in the Beneficial Owners Register, which is private and restricted, managed by the Superintendency of Non-Financial Subjects. 

b. Information Updates: The Resident Agent is required to keep the legal entity's information, especially regarding beneficial owners, updated. Any significant changes, such as modifications to the ownership or management structure, must be reported within fifteen business days. 

 

EFFECTS OF THE SUSPENSION 

 

The effects of the suspension of corporate rights of the legal entity are as follows: 

 

  1. The inability to initiate legal processes, conduct business, or dispose of assets. 

 

  1. The inability to make claims or exercise any rights. 

 

  1. The inability to carry out any corporate actions that would bind the legal entity. 

 

This means that, while the suspension is in effect, no act, document, or agreement can be registered, and no certifications related to the legal entity can be issued, except for those ordered by the competent authority or requested by third parties to enforce their rights. 

 

LIFTING OF THE SUSPENSION 

 

Once the suspension is registered, the legal entity has one (1) year to request its reactivation. 

 

The request can be made by: 

• Any administrative body (directors, board of directors, foundation council) 

• Shareholders or partners 

• Interested third parties 

 

Once reactivated, the legal entity fully regains its corporate rights and can resume all its legal and commercial activities. 

 

Requirements: 

To lift the suspension, the following is required: 

 

  • Payment of a US$1,000.00 fine to the authority that ordered the suspension. 

 

  • Remediation of the causes that led to the suspension, which may include: 

o Appointment of a new resident agent (if applicable). 

o Payment of the outstanding franchise taxes and any penalties. 

o Submission of documentation or fulfillment of tax or administrative obligations.