When is a Legal Representative Required in Panama?

Panama’s commercial setup represents a lucrative and strategic opportunity for foreign investors. Its prime location between North and South America, its numerous free trade zones, competitive tax rates, as well as its maritime expertise make Panama a perfect location to incorporate a company. However, to do that requires the help of a legal representative.

At least one legal representative is required in every corporate structure in Panama. If considering international expansion to Panama, learn more about legal representation, their functions, their responsibilities, and their liabilities.

What is a legal representative in Panama?

A legal representative is an individual that acts as the legal figurehead of the company and is the signatory of all company operational activities. They concern themselves with every legal matter associated with the company, from company amendments to income tax declarations and the signing of contracts. In doing so, the individual assumes certain personal legal liabilities and hence it is a position that is not taken lightly.

For example, if a company doesn’t declare taxes to the national tax authority, this will automatically present legal actions towards the company and consequently the legal representative as well.

The legal representative can also be subject to legal demands from other companies in the case of a legal battle. In other words, the individual assumes the risks of the economic activities of the company and, therefore, liable for any unlawful actions the company makes.

Article No. 73 of the Civil Code establishes the following: “Legal persons (Companies) will be represented judicially or extrajudicially by natural persons that the laws or the respective statutes, constitutions, regulations or foundation deeds determine.”

Who can be a legal representative in Panama?

In Panama, any person over the age of 18 can be appointed as a legal representative, Panamanian or foreign. It´s important to note that the representative does not have to live or work in Panama either, but it is recommended that the person is able to represent the company on any urgent matter rapidly.  On assigning someone to the position, their nationality, identification number and domicile are required by legal authorities for the record. By doing this, the legal representative will be registered in the constitution act of the company and will also appear in the company’s Certificate of Good Standing issued by the public registry.

When is a legal representative required in Panama?

During every day that a company is operational, there must be an appointed legal representative. However, legal representatives do not always have to be registered lawyers; they can be a trusted employee or a company director. There are instances where it is recommended to have a legal representative with legal credentials – during company incorporation, mergers and acquisitions, hiring and termination of employment, any form of legal battle and company liquidation.

Why is it important to seek local legal representation?

Being such an attractive location for investment, Panama is home to a large proportion of foreign and multinational companies. However, operating on foreign soil can often throw up a number of legal hurdles resulting in companies needing legal representation on hand.

By employing a local legal representative, they are able to authorize actions and make fast decisions immediately after the shareholder´s authorization. This allows the company to be versatile and prepared for any and all forms of legal challenge that might present itself. These decisions can be: To open a bank account, change the companies name, to sign a contract on behalf of the company or to dissolve, fuse or divide the company.

Not only does a local legal representative help with the flexibility and versatility of the company but they are also familiar with local law and customs. If problems do arise, having a local legal representative that knows the legal format, the language and the authorities involved can provide the company with a solution that would not present itself to a foreign lawyer.

How to change legal representatives?

It is common to appoint a legal representative only for a certain period of time. In instances of legal turbulence, company incorporations or transformations, specialist lawyers are often more appropriate than a director of the company. Fortunately, the process of replacing a legal representative in Panama is fairly straightforward.

This modification must be done through an act or amendment to the bylaws of the company according to the following steps:

1. Preparation of a minute of a shareholder´s or board of director´s meeting that authorizes the replacement of the legal representative of the company. (name, identification number and address will also be needed).
2. The shareholder´s meeting minute will need to be protocolized in a public notary.
3. After the protocolization, the minute must be registered in the Panamanian public registry. This officializes the change. 
4. Upon the official change of legal representative, the company must inform all public authorities of the changeover. These authorities include the national tax authority (Dirección General de Ingresos – DGI), the Ministry of Commerce and the municipality if your company has commercial activities in Panama, and social security administration (Caja de Seguro Social – CSS) if the company employs personnel.

Need legal representation in Panama? Get in touch with Biz Latin Hub.

Panama’s strong annual GDP growth, its competitive tax laws, it’s trading expertise, free trade zones and business-friendly government help make it one of the most attractive destinations worldwide for foreign investors to incorporate into. With the help of a local legal representative, take your business to new international reaches.

Biz Latin Hub offers a range of commercial and legal representation services. Our teams of lawyers and accountants all across Latin America and Australia specialize in foreign company incorporation and market entry. Partner with one of our team’s lawyers to assist and partner you in your new venture.

Reach out to us today here at Biz Latin Hub to get started with your expansion project in Panama.

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