Because of the commercial benefits that the country has to offer foreign investors, it has become popular to register a business in Panama. Despite the support the country and its special economic zones offer, problems may occur and companies may choose to exit the market through a liquidation procedure. The way in which you liquidate a company in Panama depends on company type, but always involves prior dissolution.
Key Takeaways:
| Steps to liquidate a company in Panama | For an S.A: Settle the pending company affairs. Collect the company credits. Sell or transfer company assets. Divide the assets of the company Initiate legal proceedings. |
| Time generally needed | It should take approximately six months to a year liquidate a company in Panama, if everything is in order. The time limit is three years. |
| Reasons to liquidate a company in Panama | These vary, but the key point is to stay compliant and in good standing with the authorities. |
| Involuntary liquidation | Yes, under certain circumstances. Unpaid creditors can petition a court for dissolution. |
How to dissolve a company in Panama?
Before you can liquidate the assets of your company in Panama, you must first go through a dissolution process complying with all governmental authorities, The government entities responsible for the dissolution of a company in Panama are the:
- Public registry (Registro Público de Panamá)
- National Tax Authority (Dirección General de Ingresos)
- Ministry of Commerce (Ministerio de Comercio e Industrias) – this is if the company conducted commercial activities within Panama
- Social Security (Caja del Seguro Social) – if the company managed employees in Panama.
There are two ways to liquidate a company in Panama: through voluntary and involuntary procedures.
According to the Panama Commercial Code, the conditions to dissolve and liquidate a company are:
- Expected cases established in the bylaws of the company.
- Unanimous agreement between the shareholders.
- Completion of the purpose which the company in Panama was originally established.
- By loss of the purpose for which the company was originally incorporated, or the impossibility of such achievement.
- By merging with other legal entities.
- By Judicial order.
The most common method to dissolve a company in Panama is by shareholder agreement. The company must register this agreement at the Public Registry of Panama. It must then register the formal dissolution at the National Tax Authority of Panama. Once completed, the company can proceed with the liquidation process in Panama.
What is the process for liquidating a company in Panama?
Usually, the liquidation process of a company is established in the bylaws of the company, in private documents like general shareholders meetings or legal agreements. When the process is not established by previous private documents, the company will need to follow the process established in the commercial code of Panama.
Liquidation process for an S.A. company in Panama:
The corporation (Sociedad Anónima or S.A.) is the most common type of legal entity incorporated in Panama. S.A. corporations have 3 years to complete the liquidation process in Panama once the decision to liquidate has been made.
This includes the transfer of assets, capital division, and organizing any additional arrangement through legal means. During the liquidation procedure, the company may continue to conduct business and continue operations.
The directors of the S.A. company will act as trustees and will have the following functions:
- Settle the pending company affairs.
- Collect the company credits.
- Sell or transfer company assets.
- Divide the assets of the company in Panama among the shareholders.
- Initiate and represent the company in legal proceedings.
- The directors of the company will be responsible for its debts, but only up to the amount of the assets and funds that the directors have acquired.
How to liquidate other legal entities in Panama?
Regarding all other types of legal entities in Panama, such as Limited Liability Company (Sociedad de Responsabilidad Limitada) or Partnerships (Sociedades Colectivas) the liquidation process is as follows:
- Appointment of liquidator of the company: The person appointed as a liquidator will need to be registered at the public registry of Panama. The appointment of the liquidator will be requested by the shareholders of the company to a court of law.
- The Administrators of the company must deliver to the liquidator all documents related to the company’s inventories, accounting books, company obligations and other information related to the company’s assets or credits in order to start the liquidation process in Panama.
- The liquidator will have 60 days from the date of their appointment to document the state of the company according to the balances delivered by the administrator.
- The liquidator will set a term (no less than 60 days) for any creditor claim any debts the company in Panama may have.
- The liquidator must present to the shareholder of the company the following documents:
- The exact amount of the assets and liabilities of the company
- The way in which the debts of the company were paid
- The measures taken to preserve the books of the company.
- Prepare a final act including all liquidation and partition accounts of the company
To finalize the judicial liquidation process in Panama, the shareholders must approve the act presented by the liquidator and register it in the Public Registry of Panama.
What are the obligations of the liquidator during the liquidation process in Panama?
When liquidating a company in Panama, the liquidator will have the following obligations also established by the Panamanian Commercial Code. These obligations include the following:
- Safeguard the assets of the company
- 15 days after their appointment, the liquidator must present the company’s balance sheets and accounts to the shareholders of the company in Panama
- Finish all commercial operations of the company
- Sell the assets of the company in Panama
- Maintain a registry book of all the operations related to the liquidation of the company in Panama
- Complete all the company’s remaining obligations
- Send a monthly report of the liquidation process of to the shareholder of the company in Panama
- Take all necessary legal actions on behalf of the company
- Complete transactions and represent the company to complete the liquidation process.
FAQs for Liquidating an entity in Panama
Based on our extensive experience these are the common questions we receive from clients about liquidating an entity in Panama.
1. What is the process of liquidation in Panama?
This depends on the structure of the business.
For an S.A:
Settle the pending company affairs.
Collect the company credits.
Sell or transfer company assets.
Divide the assets of the company in Panama among the shareholders.
Initiate and represent the company in legal proceedings.
For other business structures:
Appointment of liquidator of the company: The person appointed as a liquidator will need to be registered at the public registry of Panama. The appointment of the liquidator will be requested by the shareholders of the company to a court of law.
The Administrators of the company must deliver to the liquidator all documents related to the company’s inventories, accounting books, company obligations and other information related to the company’s assets or credits in order to start the liquidation process in Panama.
The liquidator will have 60 days from the date of their appointment to document the state of the company according to the balances delivered by the administrator.
The liquidator will set a term (no less than 60 days) for any creditor claim any debts the company in Panama may have.
The liquidator must present to the shareholder of the company the following documents:
Prepare a final act including all liquidation and partition accounts of the company
The exact amount of the assets and liabilities of the company
The way in which the debts of the company were paid
The measures taken to preserve the books of the company.
2. How long does it take to liquidate a company in Panama?
The liquidation process will normally take between six and 12 months, assuming the entity is in good standing and no rectification work is required. S.A. corporations have 3 years to complete the liquidation process in Panama once the decision to liquidate has been made.
3. What are the reasons to liquidate a company in Panama?
A company in Panama might go into liquidation in the following cases:
Involuntary dissolution of the company by bankruptcy
Voluntary dissolution of the company
4. Can you be forced to liquidate a company in Panama?
Yes, under certain circumstances. Unpaid creditors can petition a court for dissolution.
Liquidate a company in Panama with Biz Latin Hub
The process of dissolving and liquidating a company in Panama is complex, and requires the support of expert legal professionals.
At Biz Latin Hub, you receive the highest quality support from a bilingual team of legal experts to complete all necessary processes to close your company in Panama. We’ll guide you through your company’s liquidation while complying with all government regulations and authorities in Panama.
Contact us to find out more about how we can support you for more information.
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