It has been more than three decades since the enactment of the law that regulates the Fideicomiso. The Fideicomiso, in general terms, is the legal act whereby a settlor transfers assets to a fiduciary (trustee) that agrees to manage those assets under the provisions established in the Fideicomiso instrument (trust), for the benefit of a beneficiary, which could be the settlor itself.
On May 12 2017, Law 21 of May 10 2017 was enacted with the purpose of implementing new boundaries and reinforcing the previous regulations that applied to fiduciary companies and to the Trust in general (Law 21).
Law 21 comprises three different features. These revolve around the adoption of new regulatory guidelines pertaining to the fiduciary business, the amendment of Law 1 of 1984 (Law of Fideicomiso), and the modification of several laws containing provisions that regulate certain related aspects of those laws.
Regarding the regulatory matters enshrined in Law 21, perhaps the most important is the express limitation of the fiduciary business to holders of a fiduciary licence issued by the Superintendence of Banks. These changes preclude unauthorised persons from acting as trustees. This was a permitted practice before the enactment of Law 21, so long as it could have been reasonably construed that the persons in question were not carrying out the fiduciary business in a customary manner.
In addition, Law 21 establishes a wide array of provisions to increase the level of professionalism to safeguard and preserve the assets of trusts. Among those provisions, it is worth mentioning that the payment of a regulatory fee is introduced, and formal mechanisms of reorganisation and liquidation of fiduciaries companies have been adopted, along with a special process applicable to unclaimed assets.
As for the contractual matters concerning the trust, several amendments were made to the Law of Fideicomiso. The modifications to the law essentially seek to protect the settlors and beneficiaries, to mitigate potential moral hazard risks that may arise from situations associated with conflicts of interest.
Law 21 also sets forth provisions that modify the anti-money laundering and combating the financing of terrorism law to bolster Panama´s commitment to tackling the misuse of fiduciary services. The law also incorporates certain provisions which improve the tax treatment of trusts, in order to foster the structuring of trusts for real estate financing.
In conclusion, Law 21 aims to enhance Panama's financial services through the addition of attractive tax features, higher professional standards and tougher sanctions.
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