Closing A Panamanian Corporation With Commercial Operations In Panama

Learn the steps and formal obligations for dissolving a Panamanian corporation with commercial operations.

It is very common to find information concerning the process of incorporating a corporation in Panama. However, it is not as common to know what formal obligations arise before the various competent authorities in the event of the dissolution of a corporation with commercial operations in Panama.

There are several grounds for dissolving a corporation, but the most common ones for the purpose of this analysis are:

• expiration of the duration period; or
• decision by the board of directors or shareholders (depending on who holds this power according to the bylaws).

The first option arises when the incorporation document specifies that the corporation will have a defined duration. The second option refers to the decision, through a meeting minute of the corresponding corporate body, to dissolve the corporation.

The process to dissolve the corporation and notify the relevant authorities is as follows:

1. Minutes of the Shareholders' Meeting or Board of Directors

A minute of the board of directors or shareholders must be prepared resolving to dissolve the corporation for any of the two (2) aforementioned reasons. The minute must be registered in the Public Registry of Panama and then the dissolution must be notified through a publication in a national circulation newspaper for a term of one (1) day. This requirement is made to grant third parties with interests in the corporation the right to be informed.

2. General Revenue Directorate (DGI)

Within thirty (30) days, counted from the registration of the Public Deed mentioned above, the DGI must be notified about the dissolution of the corporation to deactivate it in the e-tax system. An essential requirement in this process is the submission of the final income tax return.

3. Cancellation of the Operation License

Once the dissolution is registered at the Public Registry, and in parallel with the process before the DGI, the operation license must be canceled in the PanamaEmprende platform, which is administered by the Ministry of Commerce and Industries (MICI). The operation license can only be canceled by the user who created it.

4. Municipality

The notification of closure of business before the Municipality requires the prior cancellation of the operation notice in PanamaEmprende, as described above. The company must be up to date with the payment of municipal taxes.

5. Social Security Agency

Companies that maintain payroll, as an essential part of the business closure process, must initiate a close of operations process before the Social Security Agency to deregister all employees from the company.

Essential requirements include submitting a copy of the last payroll where employee settlements are declared along with the detailed breakdowns of the settlements duly signed by the employees and copies of their ID cards.

The employer, i.e., the company, must notify the Social Security Agency of the business closure no later than thirty (30) calendar days following the effective date of the cessation.

The five aforementioned institutions have their own requirements and formalities that must be considered to comply with the notification process of the dissolution and resulting business closure. It is essential that the company undergoing closure is up to date with its obligations to all competent institutions.

We can consider these the standard regulatory procedures that a corporation with local operations must consider for its dissolution and business closure process. Depending on its specific commercial activity and the permits or licenses required for that activity, there will be other cancellation and notification processes for the closure of operations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.