	Beth Anne Gray J., LL.B. (Hons.) P.O. Box 832-0816 - World Trade Centre - Panama City - Republic of Panama International Legal Services

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Panamanian Limited Liability Companies

Panama LLCs are created by Law 24 of 1966, and are suffixed by "Sociedad de Responsabilidad Limitada", "S. de R. L." or "Sdad. Ltda." (general LLC) or by "Empresa de Responsabilidad Limited", "E. de R. L." or simply "Ltda." (in the case of an individual LLC).

Unlike the Panamanian Corporation, they do not offer complete anonymity to the members and are not quite as flexible as those which may be established in other jurisdictions. As with a corporation, the Panamanian SRL has limited liability, so that the members are only liable to creditors for the paid in or subscribed capital of the Company.

LLCs are considered in Panama to always be for a commercial purpose, so irrespective of their objectives they will always be subject to the rules and customs of commerce. They may be used for any commercial or civil purpose, unless this is specifically restricted by law to a certain type of company (for example, general civil partnerships for the practice of law, accountancy or architects, or banking laws).

There are two types of LLC - those with 2 or more members and the individual LLC.

General LLC

An LLC requires at least 2 members and should have no more than 20 members. However, if the 2 founding members are spouses, then the LLC must have a third founding member and must always have a 3rd member as long as the other 2 members are spouses.

Capital:

An LLC must have an authorised capital of at least $2,000.00, but should not be more than $500,000.00 (for companies with a higher capital or more than 20 shareholders, we would recommend using a Panamanian Corporation). The participation or quotas may be in varying amounts, but should always be of $100.00 or multiples thereof.

Capitalisation:

Upon incorporation, at least 50% of the capital must be subscribed to and must be paid in within no more than 5 years from the date of incorporation. Any capital to be paid in "in kind" must be paid in immediately, and if the value of these payments does not reach the assigned quotas, then the difference should be paid in with cash. Under no circumstances should the paid in capital be less than $2,000.00.

Incorporation:

As with the other corporations in Panama, incorporation of the LLC requires a Public Deed be prepared and filed in the public registry. This may be done either by the parties or by a lawyer in representation of the parties.

Information which is required for the Articles of Incorporation:

	The names and details of the founding members
	The name of the LLC
	The legal domicile of the LLC, including the address from which it will operate
	The duration of the company, as well as how the company may be wound up or continued for longer
	A description of the business that the company is being incorporated to undertake.
	The capital of the company expressed in Balboas (1 balboa = $1.00USD), the division of the capital in quotas, and the value of each quota.
	The money, assets or rights that each founding member will capitalise the company with, including the values assigned to these assets or rights, and the time frames within which such capitalisation must be completed.
	The name(s) of the person(s) who will be responsible for the management and representation of the company (managers), which may be members or not, and how long they will hold office (if no time frame provided, they will be deemed to have been appointed indefinitely).
	The form for holding members meetings and making decisions, as well as the dates on which the members must meet. If there are 5 or less members, it will not be necessary to hold general meetings, but the Articles of Incorporation must clearly state how the members should be consulted and the manner in which they should express their opinions regarding matters submitted for their review.
	Such other terms as the parties wish.

The parties may agree, in the Articles of Incorporation, that the members (or any one of them) may receive up to 7% interest on the capital invested in the LLC, even when the company has not made profits, but only for so long as the company takes to get into operation (and this should be clearly spelled out in the Articles of Incorporation).

The incorporation of an LLC, unlike the incorporation of a Panamanian corporation, must be published in the newspapers, for 3 days, within 30 days of having been filed in the Public Registry.

Amendments:

Any amendment to the Articles of Incorporation shall require the approval of no less then 2/3rds of the members (representing at least 2/3rds of the paid in capital). However, any modification which requires further capitalisation of the company or greater responsibility for the members must be unanimously approved by the members.

Publicly available information:

	Any transfer of members' interest which implies a change in the partners
	Any change of manager, representatives, attorney-in-fact or receivers
	Setting up or closing any offices or branches
	Changes in the office address of the principal place of business
	Any other resolutions of the general assembly

Ability to issue shares:

The LLC may issue a certificate to the member which evidences the authorised capital, the details of the company, the name of the member and the value of the member's participation in the LLC, including whether this is fully or partially paid in.

Voting rights are measured in multiples of $100.00, according to how much the member has contributed to the capital of the LLC.

Other miscellaneous information:

	Any member may be represented in a meeting by a proxy holder.
	The members have the right to participate proportionately in the profits, and in the liquidation of the company upon dissolution, according to their paid-in capital
	If the profits of the company, for more than 3 consecutive years, are less than 4% of the members' participation in the LLC, and the member is not a manager, the member may request that the LLC pay out all his interest in the company. In this case, the LLC has 6 months to satisfy this request, otherwise the member may request the dissolution before a court of law.
	Any transfer of interest in the LLC must be undertaken by public deed, but in any case the number of members should never be less than 2.
	Annual meetings of the members should be held, on the date established in the Articles of Incorporation.
	Before the annual meeting of the members, the manager of the LLC must prepare and present a balance sheet and income statement, which shows the profits and losses of the LLC and the proposed distribution of the profits, together with a report explaining the management of the business and any necessary explanations.
	The LLC should also maintain a share register and minutes book, which should be kept by the manager.

Individual LLC:

As mentioned before, these are known as the Empresa de Responsabilidad Limitada. This may be formed either by an individual or a married couple. Where the value of the goods transferred to the individual LLC are more than $5,000.00 and these are not cash or liquid assets, the values assigned to the assets should be certified by a CPA.

The authorised capital of an individual LLC may not be less than $1,000.00. The requirements of the Articles of Incorporation are identical to that of the LLC, except with respect to the values of the assets transferred to the LLC (mentioned above) and also the fact that the Articles may include a clause which indicates how much monthly allowance or stipend the member or his family members are entitled to receive from the LLC.

Any debts of the LLC are covered by the authorised and subscribed capital of the LLC and also by any assets which the member may have included in the Articles of Incorporation as being used to guarantee the operations of the LLC.

The individual LLC restricts the ability of the member to take dividends from the LLC, except for where there are clearly established profits of the company.

In the event of the transfer of any interest in the LLC to another party, this should be done by Public Deed and published in the newspapers.

For more information regarding Limited Liability Companies and our services, please see Corporate Law.

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Last modified 22-Jun-2009 19:21 -0400

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