Corporation Law of the Republic of Panama

Law 32 of February 26, 1927
(Official Gazette No. 5067 of March 16, 1927)

The National Assembly of Panama HEREBY DECREES:

CHAPTER I:

Incorporation

ARTICLE 1. Two or more persons of lawful age, of any nationality even though not domiciled in the Republic of Panama may, in accordance with the formalities hereinafter provided, form a corporation for any lawful purpose or purposes.

ARTICLE 2. Such persons desiring to form such a corporation shall sign articles of incorporation which shall set forth:

1. The names and domiciles of each of the subscribers of the articles;

2. The name of the corporation which will not be the same as or similar to that of another, already existing corporation so as to cause confusion. The name shall include a word, phrase or abbreviation, indicating that it is a corporation, as distinguished from a person or an association of another type. The name of the corporation may be expressed in any language.

3. The general purpose or purposes of the corporation;

4. The amount of the capital stock and the number and par value of the shares of which it is to be divided; and, if the corporation is to issue shares without par value, the statements required by Article 22 of this law; The capital stock and par value of shares of any corporation may be expressed in terms of the legal currency of the Republic or of gold units of the legal currency of any other country, or in both;

5. If there are to be shares of different classes, the number of shares to be included in each class and the designations, preferences, privileges and voting rights or restrictions or other qualifications of the shares of each class; or a statement that such designations, preferences, privileges and voting powers or restrictions or other qualifications can be determined by resolution of the majority in interest of the Stockholders or of the majority of the Directors;

6. The number of shares of stock which each subscriber of the articles of incorporation agrees to take;

7. The domicile of the corporation and the name and domicile of its resident agent in the Republic, who may be a person or corporation;

8. Its duration;

9. The number, names and addresses of its Directors, of which shall not be less than three;

10. Any other lawful provisions which the subscribers of the articles of incorporation may desire to include.

ARTICLE 3. The articles of incorporation may be executed in any place, within or outside this Republic, and in any language.

ARTICLE 4. The articles of incorporation may be in the form of a public deed, or in any other form, provided that said articles be acknowledged by a Notary Public or by any other official authorized to make acknowledgements at the place of execution.

ARTICLE 5. If the articles of incorporation are not in the form of a public deed, they must be protocolized in the office of a Notary of the Republic. If said document should be executed outside of the Republic of Panama, it must be authenticated by a Panamanian Consul before it is protocolized, or if there should be no Panamanian Consul, by the Consul of a country friendly to Panama. If the Articles of Incorporation are drafted in a language other than Spanish they must be protocolized with an authorized translation executed by an official or public interpreter of the Republic of Panama.

ARTICLE 6. The public deed or the protocolized document containing the articles of incorporation must be presented for registration in the Mercantile Registry. The incorporation of the corporation shall not have effect as to third parties until articles of incorporation have been registered.

ARTICLE 7. Any corporation formed under this law may amend its articles of incorporation in any respect provided such amendments conform to the provisions of this law. Therefore, the corporation may, by such amendment: change the number of its shares of stock or of any class of its stock outstanding at the time of such amendment; change the par value of the outstanding shares of any class having such a value; change the outstanding shares of any class having par value into the same or different number of shares of the same or a different class without par value; change the outstanding shares of a class without par value into the same or different number of shares of the same or different class having par value; increase the amount of the number of shares of its authorized stock; divide its authorized capital into classes; increase the number of classes of its authorized capital; or change the designations, rights, privileges, preferences, voting powers, restrictions or qualifications of stock. But the capital stock of a corporation shall not be reduced except in accordance with the provisions of articles 14 et seq. of this law.

ARTICLE 8. The amendments shall be made by the persons designated hereinafter and in the manner provided in this law with respect to the execution of the articles of incorporation.

ARTICLE 9. Amendments to the Articles of Incorporation which are made before stock has been issued, shall be signed by every subscriber of the articles of incorporation and by every subscriber to the stock of the corporation.

ARTICLE 10. In case stock has been issued, such amendments to the articles of incorporation shall be signed:

(a)By the holders of all the outstanding shares of the corporation entitled to vote thereon, in person or by proxy, and shall be accompanied by a certificate of the Secretary or an Assistant Secretary of the corporation stating that the persons who have executed said amendments, in person or by proxy, constitute the holders of all the outstanding shares of the corporation entitled to vote thereon; or

(b)By the President or a Vice-President and the Secretary or an Assistant Secretary of the corporation, who shall sign and annex thereto a certificate stating that they have been authorized to execute said amendments by resolution adopted by the owners or their proxy of a majority of such shares and that such resolution was adopted at a stockholders meeting held on the date specified in the notice or waiver of notice.

ARTICLE 11. In case that the amendments to the Articles of Incorporation alter the preferences of outstanding shares of any class or authorized shares having preferences which are in any respect superior to those of outstanding shares of any class, such certificate mentioned in Article 10 (b) shall state that the officers signing the same have also been authorized to execute such amendments to the Articles of Incorporation by resolution, adopted in person or by proxy of the holders of a majority of the outstanding shares of each class entitled to vote thereon, adopted at a stockholders' meeting held on a date specified upon notice or waiver of notice.

ARTICLE 12. If the articles of incorporation require more than a majority of the outstanding shares of any class or classes in order to effect any amendment of any provision of the articles of incorporation, the certificate referred to in paragraph (b) of article 10 shall state that such amendment has been authorized in that manner.

ARTICLE 13. Unless the articles of incorporation or any amendment thereof otherwise provide, in the event of an increase of stock, each stockholder shall have a pre-emptive right to subscribe, in proportion to the number of shares then held by him, the shares of stock issued pursuant to such increase.

ARTICLE 14. Any corporation may reduce its authorized capital stock by an amendment of its articles of incorporation; but no distribution of assets may be made pursuant to any such reduction, which will reduce the actual value of its remaining assets to an amount less than the total amount of its debts and liabilities plus the amount, as reduced, of its issued capital stock. There shall be annexed to the amendment to the articles of incorporation a certificate, issued under oath by the President or a Vice-President and of the Treasurer or an Assistant Treasurer, stating that no distribution of assets made or to be made pursuant thereto will violate the provisions contained in this article. In the absence of fraud, the judgment of the Directors as to the value of the assets, and their determination of debts and liabilities, shall be conclusive.

ARTICLE 15. Any corporation, unless its articles of incorporation otherwise provide, may acquire shares of its own stock by purchase or otherwise. If such acquisition or purchase is made out of funds or properties other than the surplus or the net profits of the corporation, the shares of stock so purchased or acquired shall be canceled and the amount of issued stock of the corporation shall be reduced accordingly; but such shares may be reissued if the authorized capital stock shall not have been reduced by such retirement.

ARTICLE 16. Shares of its own stock acquired by any corporation out of its surplus or net profits may be held by such corporation, or sold or otherwise disposed of from time to time for its corporate purposes and may be retired or reissued by the Board of Directors.

ARTICLE 17. No corporation shall directly or indirectly vote any shares of its own stock.

ARTICLE 18. No corporation shall purchase or otherwise acquire its own stock out of fund or property other than its surplus or net profits, if such purchase or acquisition will reduce the actual value of its assets to an amount less than the total amount of its debts and liabilities plus the amount of its issued capital stock so purchased or acquired. In the absence of fraud, the judgment of the Directors as to the value of the assets, and their determination of the debts and liabilities, shall be conclusive.

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