More than three decades have passed since the enactment of the law regulating the fideicomiso. the fideicomisoin general terms, is the legal act by which a settlor transfers assets to a trustee (trustee) who agrees to manage these assets in accordance with the provisions established in the fideicomiso instrument (trust), for the benefit of a beneficiary, who may be the settlor himself.
On May 12, 2017, Law 21 of May 10, 2017 was enacted with the aim of implementing new limits and strengthening previous regulations that applied to trust companies and the Trust in general (Law 21).
Bill 21 includes three different features. These revolve around the adoption of new regulatory guidelines relating to fiduciary activity, the amendment of Law 1 of 1984 (Law of fideicomiso) and the amendment of several laws containing provisions regulating certain related aspects of these laws.
Of the regulatory issues enshrined in Law 21, perhaps the most important is the express limitation of fiduciary activity to holders of a fiduciary license issued by the Superintendence of Banks. These amendments prevent unauthorized persons from acting as trustees. This was a permitted practice prior to the enactment of Law 21, as long as it could reasonably be construed that the persons in question were not carrying out fiduciary activity in a customary manner.
In addition, Law 21 establishes a wide range of provisions aimed at increasing the level of professionalism in safeguarding and preserving the assets of trusts. Among these provisions, it is worth mentioning that the payment of a regulatory fee is introduced and that formal mechanisms for the reorganization and liquidation of trust companies have been adopted, as well as a special process applicable to unclaimed assets.
With respect to contractual matters concerning the trust, several amendments have been made to the law of the fideicomiso. The changes made to the law are essentially intended to protect settlors and beneficiaries, to mitigate the potential risks of moral hazard that may arise from situations associated with conflicts of interest.
Law 21 also sets out provisions that amend the Anti-Money Laundering and Anti-Terrorist Financing Act to strengthen Panama’s commitment to combat the misuse of fiduciary services. The law also includes certain provisions that improve the tax treatment of trusts, in order to encourage the structuring of real estate financing trusts.
In conclusion, Law 21 aims to improve Panama’s financial services through the addition of attractive tax features, higher professional standards, and tougher penalties.
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