Panama's new financial and corporate system

What may be the most audacious financial and corporate reform ever undertaken by a Latin American country is about to become law. The bill ("the Bill") entitled "Bill for the Promotion of the Modernization and International Competitiveness of the Financial System of the Republic of Panama" was recently approved by the Cabinet Council and will be submitted for approval this week before the National Assembly.

The purpose of the Project is to turn Panama into a world-class financial platform that can actively compete with other world financial centers such as Singapore, Hong Kong, Switzerland, Luxembourg, Ireland, among others. For this purpose, it is required to modernize the current financial and corporate legislation in order to adopt and regulate products and systems that have generated the disruption of the world financial system. In this sense, the Project introduces a complete regulation of the following institutions, services and financial and corporate products:

• Specialized Financial Entities (EFE's): Financial Entities dedicated to the issuance of electronic money, administration of cryptocurrency markets and related services.

• Crowdfunding Center (Cefico's): Entities engaged in crowdfunding and crowdlending activities operating in, or from, Panama.

• Issuance of Cryptocurrencies (ICO's): Primary issuances of cryptocurrencies and tokens are regulated.

• Life insurance with "Unit Links" and "Wrappers": Life insurance policies are created in which the risk of fluctuation of the
• which the risk of investment price fluctuation is transferred to the policy and whose premium can be paid in kind -for example- with shares in companies.

• Regulation of Family Offices and Multifamily Offices: For the first time, this type of wealth management business is regulated, which may have multiple tax and immigration benefits for its managers.

• Cedular Companies and Cedular Funds: Cedular companies are created and regulated, understood as autonomous compartments whose risks, losses or benefits are not transferred to other compartments within the same company.

• Holding Company Regime: Companies holding shares or participations are created and regulated, which will have a privileged tax treatment as long as they comply with certain conditions.

• Limited Partnerships (AL) and Limited Liability Limited Partnerships (ALRL): These types of partnerships are created and regulated and may have a transparent tax treatment if they meet certain conditions.

• Private Investment Companies: Companies that -without becoming public companies- may have up to 50 investors for certain projects and are subject to report to the Superintendence of the Securities Market. Ignacio Sanín Bernal & Cía. Abogados S.A.S. - Private trust management companies: These entities are created and regulated, which may act as trustees or fiduciaries of a limited number of trusts, manage escrow accounts and represent shares in companies, among others.

• Simplification of Corporate Management: The requirement of having three (3) directors in each company is eliminated and only one (1) director per company is allowed.

• Changes to Tax Residency: The rules to be considered as a tax resident are clarified and complemented, both for individuals and legal entities.