It is always important when any offshore center introduces new legislation, but it becomes quite significant in the case of Panama which has regained its position in the premier league of offshore financial service centres. Panama has already established itself internationally in the fields of offshore companies and banking, creating a trust law some 70 years ago and an innovative captive insurance law in 1996. It is becoming apparent that more and more practitioners are blending common law and civil law vehicles, often giving their clients a distinct advantage in so doing. The Private Foundation law has made provision for foreign and Panamanian foundations to be transferred into and out of Panama, respectively. The confidentiality provisions require both professionals and public servants not to divulge information to unauthorised third parties, except that disclosure will be sanctioned in the case of drug-related crimes.
Unauthorised disclosure can result in a fine and imprisonment.
It is fair to say that the law governing Panamanian Private Foundations is based on Liechtenstein law and thus it has characteristics readily understood and appreciated by continental practitioners. Foundations in Panama, as in Europe, are ideal succession tools, which can either be inter vivos or testamentary but they may not engage in general commercial activities, unlike a trust. It is best to regard it merely as a receptacle for the assets of the offshore structure. While a trust is wedded to equity, the foundation is the owner of its own assets and functions in a codified system. Rather than trustees, the foundation is managed by a council which acts more like a board of directors.