Panama Enacts New Law To Regulate Spin-Offs As Corporate Reorganization Scheme

Author:Ms Ivette Martínez S.
Profession:Patton, Moreno & Asvat
 
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The National Assembly approved Law 85 of 22 November 2013, whereby several provisions are incorporated to our Commercial Code to allow the spin-off of companies as a form of reorganization.

A commercial company of any kind or nature may be subject of a spin-off by means of the division of all or part of its assets and its transfer to one or more companies already incorporated or to new companies called "beneficiaries", that either (i) have the same partners or shareholders of the original entity or (ii) have said original entity as its partner or shareholder.

The effect of the spin-off is the segregation and transfer of assets from the original entity to the companies or companies already organized or to be formed and the issuance of quotas or shares by these companies to the partners or shareholders of the original entity.

The approval of the spin-off is carried out by the partners or shareholders of the original entity and the minutes approving said transaction or a certificate issued by the Secretary of the meeting shall be notarized in deed form and registered at the Public Registry to be effective against third parties. Third parties are entitled to claim any rights that arise from the transaction following a notice made in the form of a certificate issued by the Public Registry and published for 3 days in a daily circulation newspaper.

The partners or shareholders of the entity subject to the spin-off may agree the following in the minutes approving such operation:

The transfer of all or part of the assets, individualized or as a block; The limitation of liability regime of the original entity and of the beneficiaries; The transfer or non-transfer of the liabilities of the original entity; The transfer of the quotas or shares that correspond to each partner or shareholder of the original entity, in proportion to their existing participations. The approval of the articles of incorporation of the company or new companies to be constituted. Unless otherwise agreed, no shareholder or partner of the original entity shall lose its condition as such by virtue of the spin-off.

From the date of registration of the spin-off at the Public Registry the beneficiary companies shall assume the obligations that...

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