Acciones Al Portador, Desmontando Falacias

by Eduardo Morgan, Jr.

August 2009

Panama became, very early in time, a pioneer in the globalization of the world economy. Its register of vessels dates to 1917 and its corporation law to 1927. The first one allowed the maritime business to develop under a flag that did not discriminate based neither on the nationality of the owners nor the crew´s. The second helped individuals and companies of different nationalities to do business in different countries through a neutral corporation. To these, we added a tax law that is purely territorial. Both instruments have had notable success: today, 20% of the world’s merchant marine flies the Panamanian flag and almost all international businesses of importance have within their legal structure a Panamanian corporation.

This is the result not only of the laws, but also of the responsible and professional way in which Panama has handled these institutions, both at a government level (Maritime Authority, Consulates, Public Registry), as well as at a private level (mainly the lawyers). The Globalization boom triggered a fierce competition by other countries and jurisdictions (mainly colonies of OECD countries and also USA States) to take over the business generated by these activities. That is how the flags of Liberia and The Marshall Islands came into existence, which are in reality corporations handled by American interests, and companies such as the IBC’s created by English and American lawyers in Caribbean jurisdictions, and let’s not forget the LLC (Limited Liability Corporation) from several American States, but mainly Delaware, that currently generates 22% of its budget with this business.

The OECD and the USA are intent on having Panama amend its corporation law to eliminate or “deposit in custody” the bearer shares, with the excuse that these lend themselves to hide criminals. They purposely overlook that the Panamanian system is designed in such a way as to facilitate their location.

To compare our control systems with, for instance, the American system, confirms this assertion. Indeed, while in Panama the involvement of a lawyer in the incorporation of a company is mandatory, in the USA the interested party may do it directly, and where an agent is used, it is not required form him/her to have any qualification to engage in the company’s or LLC’s (Limited Liability Corporations) creation business. In Panama, the Articles of Incorporation have to be made into a notarial deed that is registered in the Public Registry, which ought to contain, compulsorily, the name and address both of the Resident Agent (a lawyer), as well as, at least, three directors. In the USA what the State Register requires (each State has its own laws) is the name of the company and the address of the Agent for collection purposes. Furthermore, in Panama the lawyer is required by law to know the identity of the person requesting the company, and this is not protected by professional secrecy in the event of an investigation.

None of the 50 American States demands the identity of the person behind the company, thus allowing the LLC’s to be used for all kinds of crimes, including tax evasion in that country, leaving the FBI or other criminal investigation agencies powerless when trying to locate criminals. Worse yet is that, for that same reason, the Department of Justice has, in countless cases, been unable to answer requests for assistance from other countries. The concern over this flaw is so great that at present, the US Senate is discussing how to force States to identify those who create the LLC’s. To create companies is a business that produces large revenues (Delaware), the reason why its regulation has encountered such great resistance.

Panama’s success is in the juridical safety that it offers to its corporations users, that it is not to hide criminals, but to facilitate business for honest businesspeople and individuals. Criminals do not seek a Panamanian corporation, to hide their crimes, especially when it is less expensive and safer to use companies from States where not even the FBI, with all its technical power, can locate them.

Our laws allow a corporation to have registered and bearer shares, and may also include a restriction to their issuance in its Articles of Incorporation. Many banks demand that companies hiring their services include such a restriction. Moreover, governments forbid bearer shares in the case of many regulated activities as is the case of banking licenses. Nevertheless, what seems wrong is for the OECD to demand an amendment to the laws to forbid them when 18 of its 30 partners have them and it is a fallacy, as we have seen, to declare that this measure will prevent criminals from hiding behind them.

Lastly, those who criticize us have never been able to show a list of Panamanian corporations involved in crimes, where the responsible parties could not be identified. That is why the well reputed magazine The Economist includes Panama in its “golden” list of countries where bank accounts may not be opened, nor corporations constituted, without proven identification of the parties involved.

August 20, 2009