Who administers private interest foundations and how are they managed?

The Private Interest Foundations in Panama are legal persons with numerous benefits, but it is important to properly know how they are managed and for what they can be used and for what they cannot.

The Management of a Private Interest Foundation

First of all, it must be clear that the Private Interest Foundations in Panama cannot be used for commercial purposes, but only for asset protection, holding, or ownership of any type of assets.

The Private Interest Foundations in Panama are formed by the following bodies:

• Founder

• Foundation Council

• Protector(s)

• Beneficiary(ies)
  
  

Who Manages the Private Interest Foundations?

This will depend on how the foundation’s regulations are structured, and it is important that you receive proper advice, since each case is different.

In most cases, when the Founder transfers his assets to the foundation, so that they no longer form part of his personal estate, he gives up control, therefore he does not have the character of administrator of said assets.

The Foundation Council, on the other hand, is the one usually in charge of managing the assets of the foundation. It can be composed of three (3) natural persons of any nationality or by one legal person, also of any nationality. The degree of administrative control granted to the Foundation Council will depend on what is required by the client; many times the Foundation Council is granted full administrative control, other times it is subject to the express authorization of the figure of the Protector or Supervisor, especially when the Foundation Council is nominal or is not of the total trust of the founder or the beneficiaries.

It is important to emphasize that in the Private Interest Foundations in Panama, the Foundation Council does not need to have any type of license to be able to manage the assets of the Foundation.

The Protector, as it is called, is a very important figure within the foundation. Many powers and roles can be given to him within the foundation charter, but the main one is the supervision of the acts of the Foundation Council. The figure of the Protector is appointed in a private document called the foundation regulations. The Protector can be the same founder or a person of the founder’s full trust. In some cases, the Protector has a very important administrative role, since it may be established that the Foundation Council cannot carry out any action or make any decision without the express authorization of the Protector.

Directly and publicly, the Beneficiaries, in theory, almost never have any type of administrative power; they only enjoy the usufruct or benefits of the Foundation according to what is stipulated in the foundation charter and the foundation regulations. However, there is no restriction for the interested party to hold all or most of the positions within the foundation. In the case of bank account openings, banks require that the signatory of the account be the main beneficiary.

Among the various legal structures in Panama, one that stands out for its particularity and benefits is that of the Private Interest Foundations. Also known as Offshore Foundations in Panama, these entities offer a variety of advantages for those who seek to protect and manage their assets efficiently.

Even though the foundations of Panama are not commercial entities, they play a crucial role in asset management and estate planning. However, understanding their operation and administration can be somewhat enigmatic for those not familiar with this type of structure.

Who manages them? How are they handled? What are the roles of the different actors in their management?

At Panama Legal Lab, with our broad experience and knowledge of Panamanian foundation law, we are here to unravel the mysteries of the Private Interest Foundations in Panama and provide you with a clear and detailed guide on their management and operation.

In this article, we will dive into the fascinating world of Panamanian foundations, explore their structure, functioning, and how proper administration can help you achieve your asset protection goals.

What Are Private Interest Foundations?

Private Interest Foundations are unique and exclusive legal entities, very similar to a trust or fiduciary arrangement in their nature and purpose, but with their own legal personality. Born within Panamanian legislation in 1995, the Private Interest Foundations, also known as Panamanian Foundations, have established themselves as valuable and effective tools for asset protection and management.

These foundations, contrary to what their name might suggest, are not intended for charitable or public-benefit activities. Their main function lies in asset protection and succession planning. They allow the transfer of assets (real estate, bank accounts, shares, among others) to the foundation, separating them from the founder’s personal estate.

In this way, the foundation’s assets remain protected against any legal contingencies that may arise in the founder’s personal or business life.

It is important to mention that, although Private Interest Foundations provide a layer of protection and anonymity, they are not intended for commercial activities. They cannot, for example, directly participate in daily commercial activities, although they can hold shares or interests in companies that do.

At Panama Legal Lab, we understand the various implications of this fact, and we work with you to ensure that your foundation complies with all pertinent regulations. Knowing the law and its proper application can make a great difference in the security and effectiveness of your foundation.

At the end of the day, the Panamanian Foundations are at the heart of estate and financial planning, and their proper administration and operation are crucial for the success of your wealth and asset goals.

Structure of a Private Interest Foundation

Private Interest Foundations in Panama present a unique and differentiated structure, composed of several key roles, each with its responsibilities and functions:

• Founder: The person or entity who creates the foundation, donating assets or goods to it. Once the donation is made, the assets become the property of the foundation and no longer form part of the founder’s personal estate.

• Foundation Council: This is the entity that, in most cases, manages the assets of the foundation. It may consist of three natural persons of any nationality or a legal entity, also of any nationality. Its degree of control in the foundation’s administration may vary, depending on the foundation regulations.

• Protector: This is a very important figure within the foundation. Although not necessarily the administrator of the assets, he has the power to supervise the actions of the Foundation Council. The Protector may be the same founder or a trusted person.

• Beneficiary(ies): They are the ones who enjoy the benefits of the foundation, according to what is stipulated in the foundation charter and the foundation regulations.
  
  

Administration of the Private Interest Foundations

Understanding who manages the Private Interest Foundations and how they are handled is a fundamental aspect of their proper functioning. This is where the Foundation Council comes into play. Usually, this entity is the one in charge of managing the foundation’s assets. However, the degree of control it holds may vary depending on the foundation regulations and the figure of the Protector.

The Protector, as mentioned before, plays a vital role in supervising the Foundation Council. Depending on how it is established in the foundation regulations, the Council may need the Protector’s approval to perform certain actions or make decisions. This system of mutual control helps ensure that the foundation’s assets are managed effectively and according to the interests of the founder and beneficiaries.

The Beneficiaries, although in theory they do not have administrative powers, are a fundamental part of the operation of Private Interest Foundations in Panama. They enjoy the benefits of the foundation, as provided in the foundation charter and foundation regulations.

That is why, at Panama Legal Lab, we work closely with all parties involved to ensure that Private Interest Foundations are managed and operated effectively and in accordance with the needs and wishes of the founder and the beneficiaries.

The Role of the Beneficiary in the Administration

At first glance, it might seem that the beneficiaries of the Private Interest Foundations in Panama play a passive role in the administration of the foundation. Although it is true that, according to the foundation regulations, beneficiaries generally do not have administrative powers, their role is essential to the functioning of the foundation.

The beneficiaries are those who enjoy the fruits of the foundation, whether in terms of assets, income, or any other benefit derived from the foundation’s property. These benefits are stipulated and regulated through the foundation charter and the foundation regulations.

However, it is important to clarify that the beneficiaries do not own the foundation’s assets. These assets belong to the foundation as an entity, and the beneficiaries only have rights to the benefits generated by them, according to the terms established in the charter and the regulations.

On the other hand, in specific cases, when it comes to opening bank accounts, banks usually require that the account signatory be the main beneficiary. This means that, although the beneficiaries do not play a direct role in the administration of the foundation, their participation is crucial in certain operational aspects.

At Panama Legal Lab, we understand the importance of the beneficiaries in the Private Interest Foundations, and we work to ensure that their interests are well represented and protected. That is why we pay special attention to the drafting of the foundation charter and regulations, to ensure they accurately reflect the intentions of the founder and the rights of the beneficiaries.

The Private Interest Foundations, commonly called “Offshore Foundations”, have consolidated themselves as extraordinarily useful legal instruments for asset protection and succession planning. Their unique structure and level of safeguard have made them a preferred option for individuals and families worldwide who seek to protect their assets and secure their future.

At the core of their efficiency lies precise and expert administration. Understanding the functions and obligations of the various participants in the foundation—from the Founder to the Beneficiary—is essential to ensure its proper operation.

At Panama Legal Lab, we have extensive experience in understanding and managing Private Interest Foundations in Panama. We take pride in offering our clients the guidance and advice required to navigate the complexity of these structures. Our primary purpose is to ensure that our clients’ foundations are properly structured and administered so that they meet their needs and objectives while complying with all relevant regulations.

Entering the intriguing world of Panamanian foundations might seem intimidating at first, but with the right guidance, it can become a rewarding path.

If you are considering creating a Private Interest Foundation or already have one and need advice, do not hesitate to contact us. At Panama Legal Lab, we are ready to help you take the right steps toward a safe and prosperous future.

Remember, the Private Interest Foundations are not just a legal tool — they are the key to protecting your wealth and ensuring the well-being of future generations.