Companies are commonly used for various purposes. If we focus on Panamanian corporations, we can find corporations with various types of commercial operations, either in Panama or abroad. There may also be corporations dedicated solely to holding assets, such as a corporation created to hold a bank account. Regardless of the company's activity, whether Panamanian or from another jurisdiction, the proper issuance and ownership of its shares is a matter of utmost importance, especially when it comes to proper estate planning.
I am not a lawyer. What is ownership? What is a share? What is a natural person?
It is certainly worth clarifying some terms before delving a little deeper into the subject of this article. First, by ownership we understand the right that a person may have over something, which grants them certain powers, such as selling that thing. Among the things that a person can own are the shares issued by a company. Usually, to incorporate a company in Panama or abroad, the law requires that the company have capital. By capital we mean the money that the partners contribute so that the company can begin operations. In exchange for this contribution, the company issues shares to these partners, which grant them certain rights. One of these rights is the right to vote at shareholder meetings. Finally, a natural person is simply any person of flesh and blood. It is important to make this distinction for the purposes of this article, since legal persons also exist. These are legal creations or inventions, but like a natural person, they can exercise rights (such as the ownership rights we discussed) and incur obligations.
Now I understand, but I have a company that has never issued shares. What happens in that case?
This is precisely one of the most common problems we encounter with our clients. For various reasons, at the time of incorporation, the company did not issue shares to the people who should have been appointed as its shareholders. This is highly problematic because it would be very difficult for a person to prove their status as a shareholder (and therefore their rights as such) without those shares. If you have one or more companies in this situation, we suggest contacting a lawyer specializing in corporate matters to resolve it as soon as possible.
I found some stock certificates in my name! Am I up to date now?
Yes, by confirming that the company did issue shares, we have largely completed the work. However, it is worth mentioning that when the shareholder, being a natural person, dies, the shares will be transferred to their heirs through probate. Probate in this case does not necessarily take place in the shareholder's country of residence; it may have to take place in the company's country of incorporation. In addition, probate tends to be slow, lengthy, and expensive, and can become complicated if there is conflict between the heirs.
What do you suggest doing in that case?
There are several options to avoid probate; the most common alternatives involve the creation of a new legal entity to become the shareholder in place of the natural person. For example, Panamanian private interest foundations can be used for this purpose. Feel free to contact us to discuss the different solutions we can offer. Siéntase libre de contactarnos para evaluar las distintas soluciones que podemos ofrecerle.
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