On 1 January 2017 a new law will come into force requiring certain Panamanian companies and other entities to keep accounting records and supporting documentation.
Accounting Records
The law applies to all Panamanian entities that do not conduct activities that are completed, performed or produce effects in Panama. Such entities must from the New Year keep accounting records that accurately record the entity’s commercial activity, assets and liabilities and shareholders’ equity accurately reflecting the financial position of the entity. Accurate financial statements are also required.
The accounting records must be kept either at the registered agent’s office in Panama or elsewhere as authorised by the directors, foundation council or other administrative body of the entity. Records may, therefore, be kept outside of Panama but in such a case the registered agent must have written confirmation of who holds the records, where they are held with full contact details. The agent must be notified of any change to the details within 15 working days.
Should the agent request the accounting records and supporting documents they must be provided within 15 working days, in default the agent is compelled to resign as agent in the next 10 working days. The Panamanian Company Registry will then refuse to register the appointment of a replacement agent until the accounts and documents are provided.
Companies that fail to comply with the accounting requirements are subject to various penalties, principally a fine of USD1,000 plus a daily fine of USD100 until the breach is remedied.
The law requires the accounts and supporting documents to be kept for five years from the last day of the calendar year in which the transactions completed or the last day of the entity’s accounting year.
Other Provisions
Suspension of rights: Other new provisions in the Law give power to the Panamanian Registry to suspend the corporate rights of companies and other entities that:
Fails to appoint a replacement registered agent for more than 90 days after the resignation or other removal of the existing agent.
Fails to pay the annual Panamanian fees for three consecutive years, or
Fails to pay any fine or other penalty imposed by a competent Panamanian authority.
The effect of the suspension of corporate rights will prevent an entity doing business, completing any transaction of its assets, commencing legal proceedings and exercising any right. The entity has up to two years to apply for reactivation of its legal rights, after it has first remedied the breach that resulted in its rights being suspended.
The reactivation process can be commenced by the entity’s administrative body, shareholders or any interested third party among others. A fee of USD1,000 is payable. If not reactivated, the entity will be permanently dissolved.
Registered agent’s certification: An outgoing agent is now required to provide a certificate to confirm all fees are paid and to give their consent to the appointment of a new agent. The certificate will be attached to the notarial deed recording the change. The law states that an agent is permitted to resign at any time.