Important aspects of the amendments to the legislation on trusts proposed by the Panamanian Superintendence of Banks
By Oliver Muñoz, Quijano & Associates
The Superintendency of Banks in the Republic of Panama has recently submitted the following documents for the consideration of the companies that have a Panamanian trust licence (i.e. "trust companies"):
(i) A bill of amendments to Law 1 of 1984 regulating Trust in Panama, and
(ii) A bill stipulating rules for the regulation and supervision of trust companies and the trust business in Panama.
The most important aspects of these documents are the following:
(i) In the bill of amendments to Law 1 of 1984 regulating Trust in Panama:
- A wider scope in the definition of trust so that trusts may be established not only in favour of beneficiaries but also for some given purpose determined by the settlor. This amendment intends to introduce in the Panamanian trust legislation those trusts called "special purpose trusts", quite frequent in the jurisdictions following the tradition of common law.
- The possible adherence of third parties other than the settlor and their acceptance of the provisions contained in a trust agreement, provided that the trust agreement expressly contemplates said possibility.
- The requirement of the identity of the beneficiary of the trust is eliminated in the case of special purpose trusts.
- The adoption of a name or an identification of the trust to be established is required.
- Any clause providing that the trust companies, or its subsidiaries, affiliated or related parties may directly or indirectly acquire assets of the trust as part of the trust business is expressly prohibited.
- It stipulates that, in the case of trusts established by persons who are not required to have a trust licence, they must expressly state that the trustee is not under the supervision and regulation of the Superintendence of Banks. Any trust that does not include said statement will be null and void.
- In respect of the exercise of legal actions arising from the transfer of assets to a trust by a debtor with fraud and in prejudice of the rights of third parties or creditors, a statute of limitations of three years to be counted as from the date when the transfer took place is established.
- It will be possible to appoint beneficiaries in an act after the establishment of the trust, and it will also be possible to establish priorities among the beneficiaries and to appoint substitutes of any substitute.
- It stipulates that the beneficiary or the settlor may assign all of part of their rights over a trust, provided always that it be irrevocable and that the trust does not forbid it.
- It creates the possibility of terminating the trust agreement by mutual agreement of the settlor and the beneficiary, without prejudice to the rights of the fiduciary or of bona fide third parties, or because the settlor decides to revoke the trust, provided always that this be expressly contained in the trust agreement.
(ii) A bill stipulating rules for the regulation and supervision of trust companies and the trust business in Panama:
- The specific powers and functions, which the Board of Directors of the Superintendency and the Superintendent may exercise for the proper regulation and supervision of trust companies are established.
- The following are among the main powers of the Board of Directors of the Superintendency of Banks:
- To determine the documents required for obtaining a trust licence.
- To establish the accounting standards to be followed by trust companies in connection with financial information.
- To establish the rules to be abided by trust companies in connection with Corporate Governance and Internal Control.
- To establish or modify the Trust Regulation and Supervision Fees.
- To modify the amount of trust guarantee and/or the minimum capital requirement of the trust companies.
- To resolve the appeals submitted against the resolutions of the Superintendent.
- In connection with the regulation and supervision of the trust business, the main powers of the Superintendent are the following:
- To authorise or refuse the concession of trust licences.
- To supervise that the trust companies comply with the provisions of the Law and its regulations.
- To establish the rules that must be abided by the trust companies in respect of the following:
> Publicity programmes
> Closing and moving offices
> Duties concerning information
> Prudential rules
> Evaluation of risks and valuation of trusts
> Conflicts of interest
> Facts of importance
> Other aspects related to the development of the trust business and the proper compliance with the provisions of the Law and its regulations.
- To order the intervention or mandatory liquidation of trust companies.
- To impose the sanctions established for the violation or non-compliance with the rules or regulations applicable to trust companies.
The amendments of the trust legislation that are being contemplated introduce elements that will contribute to modernising the existing rules and regulations applicable to trust companies and to the trust business in the Republic of Panama.
Oliver Muñoz, Quijano & Associates
Panama City, Panama