Law No. 32 of February 26, 1927 on Anonymous Corporations

Published on the internet by Legalinfo-Panama.com Law No. 32 of February 26, 1927 (Official Gazette 5,067 of March 16, 1927) "On Anonymous Corporations"

Section I
Of the formation of the corporation

Article 1. Two or more persons of legal age, of any nationality, even if they are not domiciled in the Republic, may constitute an anonymous corporation for any lawful object, in accordance with the formalities prescribed in this law.

Article 2. Persons wishing to constitute an anonymous corporation shall sign a social pact, which must contain:

1. The names and domiciles of each of the subscribers to the social pact;
2. The name of the corporation, which shall not be identical or similar to that of any pre-existing corporation in such a way as to cause confusion.
   The denomination shall include a word, phrase, or abbreviation indicating that it is an anonymous corporation and distinguishing it from a natural person or a corporation of another nature.
   The name of the anonymous corporation may be expressed in any language;
3. The general object or objects of the corporation;
4. The amount of the social capital and the number and nominal value of the shares into which it is divided; and if the corporation is to issue shares without nominal value, the declarations mentioned in Article 22 of this law.
   The amount of the social capital and the nominal value of the shares may be expressed in the current currency of the Republic or in legal gold currency of any country, or in both;
5. If there are shares of various classes, the number of each class, and the designations, preferences, privileges, and voting rights, and the restrictions or requirements of the shares of each class; or the stipulation that such designations, preferences, privileges, and voting rights, or the restrictions or other requirements may be determined by resolution of the majority of the interested shareholders or by resolution of the majority of the directors;
6. The number of shares that each subscriber to the social pact agrees to take;
7. The domicile of the corporation and the name and domicile of its agent in the Republic,

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8. The duration of the corporation;
9. The number of directors, which shall not be less than three, with specification of their names and addresses;
10. Any other lawful clauses that the subscribers have agreed upon.

Article 3. The social pact may be executed anywhere, within or outside the Republic, and in any language.

Article 4. The social pact may be evidenced by means of a public deed, or in another form, provided that it is attested by a Public Notary or by any other official authorized to make attestations in the place of execution.

Article 5. If the social pact is not contained in a public deed, it must be recorded in a Notary Office of the Republic.
If said document was executed outside the Republic, it must, for its recording, be previously authorized by a Panamanian Consul, or in the absence thereof, by the Consul of a friendly nation.
And if it is in a language other than Spanish, it must be recorded together with its translation authorized by an official or public interpreter of the Republic.

Article 6. The public deed or the recorded document containing the social pact must be presented for registration in the Commercial Registry.
The constitution of the corporation shall not produce effects with respect to third parties until the respective pact has been registered.

Article 7. An anonymous corporation constituted in accordance with the provisions of this law may reform its social pact in any of its clauses, provided that the reforms conform to the provisions of this law.
Consequently, the corporation may: vary the quantity of its shares or of any class of its shares subscribed at the time of the reform; vary the nominal value of the shares subscribed of any class; change subscribed shares of a class having nominal value for the same or different quantity of shares of the same class, or of another class of shares without nominal value; change subscribed shares of a class of shares without nominal value for the same or different quantity of shares of the same class, or of another class of shares with nominal value; increase the quantity or number of shares of its authorized capital; divide its authorized capital into classes; increase the number of classes of its authorized capital; vary the designations of the shares, the rights, privileges, preferences, voting rights, and the restrictions or requirements.

Published on the internet by Legalinfo-Panama.com But the social capital may not be reduced except in accordance with the provisions of Articles 14 and following of this law.

Article 8. The reforms of the social pact shall be made by the persons determined hereinafter and in the manner established in this law for the execution of the social pact.

Article 9. The reforms of the social pact agreed upon before shares have been issued shall be signed by all who have subscribed to said pact and by all who have agreed to take shares.

Article 10. In the case where shares have been issued, the reforms of the social pact shall be signed:
a. By the holders or their attorneys of all the subscribed shares that have the right to vote, provided that a certificate issued by the Secretary or by one of the Assistant Secretaries of the corporation is attached to the reform document to the effect that the persons who have signed said reforms, in their own name or by attorney, constituted the entirety of the holders of the subscribed shares with voting rights; b. By the President or one of the Vice-Presidents and the Secretary or one of the Assistant Secretaries of the corporation, who shall sign and attach to the reform document a certificate stating: that they have been authorized to execute said document by resolution adopted by the owners or the attorneys of the majority of said shares and that said resolution was adopted in a shareholders' meeting held on the date fixed in the summons or in the waiver thereof.

Article 11. In the case where the reforms of the social pact alter the preferences of the subscribed shares of any class or authorize the issuance of shares with preference that in any way is more advantageous than that of the subscribed shares of any class, the certificate referred to in paragraph b) of the preceding article shall state that the corporation officials who signed it have been authorized to execute the reform document by resolution adopted by the owners or the attorneys of the majority of the shares of each class with voting rights, and that said resolution was adopted in a shareholders' meeting held on the date fixed in the summons or in the waiver thereof.

Article 12. If the social pact provides that more than a majority of the subscribed shares or of any class of shares is required for it to be reformed, the certificate referred to in paragraph b) of Article 10 shall state that the reform in question has been authorized in that manner.

Article 13. If the social pact or the reforms of said pact do not provide otherwise, each shareholder shall have a preemptive right to subscribe, in proportion to the shares they own, to shares issued pursuant to an increase in capital.

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Article 14. The corporation may reduce its authorized capital by means of reforms to its social pact; but no distribution of its assets may be made by virtue of such reduction if thereby the value of said assets is reduced to an amount representing less than the total value of its liabilities, considering as part thereof the reduced capital.
To the document containing the respective reform, a certificate issued under oath by the President or the Vice-President and the Treasurer or one of the Assistant Treasurers shall be attached, stating that the distribution does not infringe the provisions of the preceding paragraph.
The appraisal of the value of the assets and liabilities by the Board of Directors shall be considered correct except in case of fraud.

Article 15. Unless otherwise provided in the social pact, the anonymous corporation may acquire its own shares. If the acquisition is verified with funds or assets that are not part of the excess of assets over liabilities or of net earnings, the acquired shares shall be cancelled by reducing the issued capital; but such shares may be sold again if the authorized capital is not reduced by the cancellation of said shares.

Article 16. The shares of a corporation that it acquires with funds derived from the excess of its assets over its liabilities or from net earnings may be retained by the corporation, or sold by it for the objects of its founding, and may be cancelled and remitted by agreement of the Board of Directors.

Article 17. The shares of a corporation that it acquires may not, directly or indirectly, be represented in the Shareholders' Assembly.

Article 18. No corporation may acquire its own shares with funds that are not derived from the excess of its assets over its liabilities or from net earnings if by reason of such acquisition the current value of its assets is reduced to an amount representing less than the total value of its liabilities, considering as part thereof the reduced capital.
The appraisal of the value of the assets and liabilities by the Board of Directors shall be considered correct, except in case of fraud.

Section II
Of the powers of the anonymous corporation

Article 19. Every anonymous corporation constituted in accordance with this Law shall have, in addition to the powers that the law itself grants it, the following:

1. The power to sue and be sued in court;
2. The power to adopt and use a corporate seal and to vary it when it deems convenient;

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3. The power to acquire, buy, hold, use, and transfer movable and immovable property of all kinds and to constitute and accept pledges, mortgages, leases, charges, and encumbrances of all kinds;
4. The power to appoint signatories and agents;
5. The power to enter into contracts of all kinds;
6. The power to issue, without violating current laws or the social pact, statutes for the management, regulation, and government of its business and assets, for the transfer of its shares, for the calling of shareholders' and directors' meetings, for any other lawful object;
7. The power to conduct its business and exercise its powers in foreign countries;
8. The power to agree on its dissolution in accordance with the law, either by its own will or by another cause;
9. The power to borrow money and incur debts in relation to its business or for any lawful object; the power to issue bonds, promissory notes, bills of exchange, and other obligation documents (which may or may not be convertible into shares of the corporation) payable on a specific date or dates, or payable upon the occurrence of a specific event, either with mortgage or pledge security or without security, for money lent or in payment for assets acquired, or for any other legal cause;
10. The power to guarantee, acquire, buy, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of or negotiate in shares, bonds, or other obligations issued by other corporations or by any municipality, province, state, or government;
11. The power to do whatever is necessary to develop the objects enumerated in the social pact or in its reforms, or what is necessary or convenient for the protection and benefit of the corporation, and in general, the power to conduct any lawful business even if it is not similar to any of the objects specified in the social pact or in its reforms.

Section III
Of the shares and capital

Article 20. The corporation shall have the power to create and issue one or more classes of shares, with the designations, preferences, privileges, voting power, restrictions or requirements, and other rights that its social pact determines, and subject to the redemption rights that the corporation has reserved in the social pact.
The social pact may provide that shares of one class are convertible into shares of another or other classes.

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Article 21. Shares may have a nominal value. Such shares may be issued as fully paid and released, as partially paid, or even without any payment having been made for them. Unless otherwise provided in the social pact, fully paid and released shares of nominal value, or bonds or shares convertible into fully paid and released shares of nominal value, may not be issued in exchange for services or assets that, in the judgment of the Board of Directors, have a value less than the nominal value of such shares or of the shares into which such bonds or shares are convertible. It may not be indicated in the certificates for partially paid shares that a sum has been paid on account of such shares greater, in the judgment of the Board of Directors, than the value of what has actually been paid. Payment may be in money, in work, in services, or in assets of any kind.
The appraisals of the Board of Directors on values shall be considered correct, except in case of fraud.

Article 22. Anonymous corporations may create and issue shares without nominal value, provided that the social pact states:

1. The total quantity of shares that the corporation may issue;
2. The quantity of shares with nominal value, if any, and the value of each;
3. The quantity of shares without nominal value;
4. One or other of the following declarations:
   a. That the social capital shall be at least equal to the total sum represented by the shares with nominal value, plus a determined sum with respect to each share without nominal value that is issued, and the sums that from time to time are incorporated into the social capital in accordance with resolution or resolutions of the Board of Directors; or, b. That the social capital shall be at least equal to the total sum represented by the shares with nominal value, plus the value that the corporation receives for the issuance of the shares without nominal value, and the sums that from time to time are incorporated into the social capital in accordance with resolution or resolutions of the Board of Directors. An additional declaration may also be stated in the social pact to the effect that the social capital shall not be less than the sum fixed therein.

Article 23. All shares of a class, whether with nominal value or without nominal value, shall be equal to the shares of that same class, subject, nevertheless, to the designations, preferences, privileges, voting power, restrictions or requirements conferred or imposed with respect to any class of shares.

Article 24. The anonymous corporation may issue and sell the shares without nominal value that it is authorized to issue, for the sum stipulated in the social pact; for the price deemed equitable, in the judgment of the Board of Directors; for the price that the Board of Directors determines from time to time, if the social pact authorizes it; or for the price determined by the holders of the majority of the shares with voting rights.

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Article 25. All shares referred to in Articles 22, 23, and 24 of this Law shall be considered as fully paid and released. The holders of such shares are not liable for said shares either with respect to the corporation or with respect to its creditors.

Article 26. The price of the shares shall be paid on the dates and in the manner determined by the Board of Directors. In case of default, the Board of Directors may opt to proceed against the delinquent holder to enforce the part of the capital that has not been delivered and the damages the corporation has suffered, or to rescind the contract with respect to the delinquent partner, with the right in the latter case to retain for the corporation the amounts corresponding to said partner in the social mass.
In the event that the option to rescind the contract with respect to the delinquent partner and to retain for the corporation the amounts corresponding to said partner is chosen, the Board of Directors must give notice thereof to said partner at least sixty days in advance.
The shares that the corporation acquires by virtue of the provisions of this article may be remitted and offered again for subscription.

Article 27. The share title or certificate must contain:

1. The registration of the corporation in the Commercial Registry;
2. The social capital;
3. The quantity of shares corresponding to the holder,
4. The class of share, if there are different classes, as well as the special conditions, designations, preferences, privileges, premiums, advantages, and restrictions or requirements that any of the classes of shares have over the others;
5. If the shares represented by the certificate are fully paid and released, this circumstance shall be expressed in said certificate; and if they have not been fully paid and released, it shall also be recorded in the certificate the sum that has been paid;
6. If the share is registered, the name of the shareholder must be recorded.

Article 28. Bearer shares shall not be issued unless they have been fully paid and released.

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Article 29. Registered shares shall be transferable in the company's books in accordance with what the social pact or the statutes provide for this purpose. But in no case shall the transfer bind the corporation unless from its registration in the Share Register.
If the holder of the certificate owes any sum to the corporation, it may oppose the transfer until the owed amount is paid. In any case, the transferor and the transferee shall be jointly and severally liable for the payment of the sums owed to the corporation by virtue of the shares being transferred.

Article 30. The transfer of bearer shares shall be verified by the mere delivery of the title.

Article 31. If the social pact so stipulates, the holder of a certificate of bearer shares issued to bearer may obtain that said certificate be exchanged for another certificate in his name for an equal number of shares; and the holder of registered shares may obtain that his certificate be exchanged for a bearer certificate for an equal number of shares.

Article 32. It may be stipulated in the social pact that the corporation or any of the shareholders shall have a preemptive right to buy the shares in the corporation that another shareholder wishes to transfer.
Other restrictions may also be imposed on the transfer of shares; but any restriction that absolutely prohibits the transfer of shares shall be null.

Article 33. The corporation may issue new share certificates to replace those that have been destroyed, lost, or stolen. In such case, the Board of Directors may require that the owner of the destroyed, lost, or stolen certificate provide a bond to answer to the corporation for any claim or damage.

Article 34. It may be stipulated in the social pact that the holders of any particular class of shares shall not have voting rights, or that this right may be restricted or defined with respect to the different classes of shares.
These stipulations in the social pact shall prevail in all votes that take place and in all cases where the law requires the vote or written consent of the holders of all shares or of a part thereof.
It may also be stipulated in the social pact that the vote of more than a majority of any class of shares is required for certain purposes.

Article 35. One or more holders of shares may agree in writing to transfer their shares to one or more Trustees in order to confer upon them the right to vote on behalf and in place of the owner, for a determined period and in accordance with the conditions indicated in the agreement. Other shareholders may transfer their shares to the same Trustee or Trustees, becoming parties to the agreement by virtue of said transfer. The share certificates thus transferred shall be delivered to the corporation and cancelled by it in exchange for the issuance in favor of the Trustee or Trustees of new certificates in which it shall be expressed that they are issued by virtue of said agreement, and these circumstances shall be noted in the share register of the corporation. It is necessary for the provisions of this article to take effect that an authenticated copy of said agreement be supplied to the corporation.

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Article 36. The corporation shall be obliged to keep in its office in the Republic, or in any other place that the social pact or the statutes determine, a book called the "Share Register," in which shall be recorded, except in the case of shares issued to bearer, the names of all persons who are shareholders of the company, in alphabetical order, with indication of the place of their domicile, the number of shares corresponding to each of them, the date of acquisition and the sum paid for it or that the shares are fully paid and released.
In the case of shares issued to bearer, the Share Register shall indicate the number of shares issued, the date of issuance, and that the shares have been fully paid and released.

Article 37. Shareholders may be paid dividends from the net earnings of the company or from the excess of its assets over its liabilities, but not in any other manner. The company may declare and pay dividends based on the amount currently paid for shares that have been partially paid.

Article 38. When the Board of Directors so determines, dividends may be paid in shares of the company, provided that the shares issued for this purpose had been duly authorized and provided that, if the shares had not been previously issued, a sum at least equal to that corresponding to the shares to be issued as dividends had been transferred from the surplus account to the capital of the company.

Article 39. Shareholders are only liable with respect to the creditors of the company up to the amount they owe on account of their shares, but no lawsuit may be brought against any shareholder for a debt of the company until a judgment has been rendered against it whose total amount has not been collected after execution against the corporate assets.

Section IV
Of shareholders' meetings

Article 40. Whenever, in accordance with the provisions of this law, the approval or authorization of the shareholders is necessary, the summons for a meeting of the Shareholders' Assembly shall be in writing and addressed to the President, Vice President, Secretary or Sub-Secretary, or to any other person or persons authorized for this purpose by the social pact or the statutes.
The summons shall indicate the object or objects for which the Assembly is convened and the place and time of its celebration.

Article 41. Shareholders' meetings shall be held in the Republic, unless the social pact or the statutes provide otherwise.

Article 42. The summons