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Private Investment Fund in Panama

Overview

Panamanian securities law (Law Decree 1, 1999, and Agreement No. 5-2004, July 23rd, 2004) regulates investment funds. It regulates funds based on number of investors, location of operation, investment types and capitalization. The elements mentioned before will determine 1. registration obligation, 2. supervision obligation.

The framework in question offers two vehicles which allow you to operate without a license, which substantially limits set-up and operation costs. Such funds can be set-up as low-cost purpose funds, which guarantee legal framework for financial transactions and structure of that nature, or purpose equity vehicles, if you stay within the limitations established by law.

What is a Private Investment Fund?

It is a company incorporated for the purpose of doing specific investments on behalf of its shareholders, and that does not solicit capital from retail investors or the general public, unless as specifically allowed in the local securities laws, which usually refers to qualified investors.

In Panama, the PIF is enacted by Law 1 of July 8th of 1999 along with regulation 5 of July 23rd of 2004 by the Superintendence of the Securities Market (SSM).

The PIF must have a legal representative in the Republic of Panama, who may be a broker, a brokerage house, an investment advisor, a bank, a firm of public accountants, a lawyer, a law firm or, in any event, people authorized for such purposes by the SSM. The legal representatives will represent the PIF before the SSM and receive administrative and judicial notifications in representation on its behalf.

Types of Private Investment Funds

In Panama, there are two types of Private Investment Funds based on the number of investors: PIF-20 (Twenty Investors) and PIF-50 (Fifty investors).

PIF-20 (Twenty Investors)

The fund is limited to 20 investors maximum, investors which should be related to each other by their belonging to a company, association, or group. The shares of this fund can also not be commercialized, distributed, or publicly offered. The article also includes another exception to the rule, which is corporations in which shares were emitted in virtue of a contract between participants, prohibiting the entrance of new shareholders. Under these two exceptions, the fund will not need to: 1. Register with the SMV (Superintendence of Securities), 2. Be supervised by the SMV or 3. Notify them of the beginning of your operations.

Requirements to establish a 20-PIF:

  1. Process the order and payment.
  2. Process KYC requirements.
  3. Process the IBC form and provide passport copies for the directors and dignitaries.
    • Note: there are no incorporation requirements such as subscription agreements or sheet summaries.

Fees to setup a PIF-20

Our fee for the set-up and structuring of the fund is 2,500.00USD (costs included). This does not include subscription agreements for shareholders, or any additional contracts needed for the structure. Those will be quoted separately upon request.

PIF-50 (Fifty investors)

PIF-50s are those investment funds that operate in or from the Republic of Panama, whose participation quotas are not offered in the Republic of Panama and whose articles of incorporation, trust instruments or articles of incorporation contain the following provisions:

  • A provision that limits the number of beneficial owners (investors) of the FIP participation quotas to fifty (50);
  • A provision requiring all offers to be made through private communications and not through public means;
  • A provision that establishes that its participation quotas will only be offered to qualified investors whose minimum initial investment is US$100,000.00.

Who is a qualified investor?

Qualified investors are those individuals or legal entities (i) whose line of business includes trading, on their own behalf or on behalf of third parties, in tradable assets that make up the FIP’s trading book or a substantial amount of its trading book or (ii) those who have signed a declaration that their assets, individually or jointly with their spouse, are worth no less than US$1,000,000.00 and have consented to be treated as qualified investors.

Requirements to establish a 50-I PIF:

The PIF must have a legal representative in the Republic of Panama, which may be a broker, a brokerage house, an investment advisor, a bank, a public accounting firm, a lawyer, a law firm or, in any case , persons authorized for such purposes by the SMV. The legal representatives must have the necessary qualifications to represent the PIF before the SMV and receive administrative and judicial notifications on behalf of the PIF.

Before beginning operations in the Republic of Panama, the PIF must notify the SMV, through a lawyer, that it has met the requirements established in Agreement No. 5 of 2004. This notification does not mean that the PIF is considered a person registered with the SMV. Simply, the PIF must deliver to its representative in the Republic of Panama, in order to be available for inspection by the SMV, the following information:

  1. Copy of the articles of incorporation or the trust instrument or the document by which the FIP was established, with all its current amendments to date.
  2. Copy of the prospectus or similar document used to offer the FIP participation fees.
  3. Audited financial statements of the PIF for the last fiscal period.
  4. Certificate of existence of the PIF, issued by a competent government entity in the jurisdiction of the FIP’s constitution, or other similar proof of its existence.
  5. Documents that accredit the appointment of the PIF representative in the Republic of Panama, and in which the conditions under which said representation is granted will be stated.
  6. A certification from the Board of Directors, or failing that, a sworn statement from the director or legal representative, formally declaring that the PIF meets the requirements to be considered a Private Investment Company in accordance with the Securities Law.
  7. Name and address of the PIF, its investment manager, its offeror and its custodian, as well as their directors and main executives.
  8. The PIF must notify its representative in the Republic of Panama of any change in the aforementioned information within the next 120 days after the change in information has occurred. The PIF must also deliver to its representative in the Republic of Panama copies of its audited financial statements for the last fiscal year within the next 120 days after the end of the corresponding fiscal year.

Fees to setup a PIF-50

Our fee for the set-up of the PIF-50 starts at 3,500.00USD (subject to structure complexity). This does not include the notification to the SMV, which is charged separately for a fee of 700.00USD. Timeframe is subject to structure complexity. General timeframe is around 1-2 months.

Contact Us

The Kraemer & Kraemer team is qualified to provide assistance for the establishment of Private Investment Funds. Send us a note to info@kraemerlaw.com and our team will be glad to help you.

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