It is sad that government officials of emerging financial centers from different continents have never met together, like OECD, OPEC, BRIC and other economically-motivated alliances. The West Indian prime ministers may meet regularly for regional matters but it is hard to visualize them making a strong anti-OECD statement along with Panama's outspoken Martinelli, Uruguay's Leftist Mujica, Seychelles' Michel and the Cypriot, Luxembourgois and Swiss officials. Each country sees themselves as different (or superior) to the other financial centers and is confident that they can weather the storm through bilateral talks with each "name-and-shame" powers through Free Trade Agreements or the European Union. Since the promoters of each financial center made confidentiality a competitive advantage, within their own countries bankers are unknown to the rest of the general population who votes for Presidents who may be oblivious to the contributions their banking centers make in providing access to easier credit, technology and sustainable employment of their communities.
Bermuda's Finance Minister said it the way it is: US and European governments need money for tax-and-spend schemes and OECD technocrats have deceived them into thinking there is a pot of gold of trillions of dollars at financial centers elsewhere when centers like London is the largest tax haven for other countries.
Bermuda and other Overseas Territories are being used as the scapegoats for policy failures of larger countries, but more must be done to educate Europe about the Island’s business model.
So said Finance Minister Bob Richards and Premier Craig Cannonier as they updated the media yesterday on their meetings with British Prime Minister David Cameron.
Mr Cannonier stressed that no agreements were signed in London and his Government will not do anything to jeopardise Bermuda’s financial model or previous agreements the Island has signed.
Mr Richards said there was a “groundswell” of opinion against offshore financial centres in London driven by a number of factors.
“First of all the US is coming out of a recession, Europe and the UK are not. Unemployment remains very high in the UK. Budget deficits are ballooning So it's a very difficult and negative environment over there.”
He said the Overseas Territories and Crown Dependencies were “to some extent being used as scapegoats and distractions for domestic policy failures.”
In addition, there was a “corps of non-Governmental organisations” who had “latched on to this notion that either multinational organisations or so-called tax havens are responsible for these poor countries not having any money.
“I was very surprised at the virulence of that sentiment that exists over there right now. Our message is to a significant extent being overwhelmed by that noise.
“Therefore we have to up our game.”
Mr Richards said that Bermuda had been more successful with its public relations in the US than in the UK.
“We just kind of assumed that because we have this relationship with Britain and we have these representatives in our midst at all times at a most senior level that somehow there’s an understanding over there of what Bermuda is all about.
“And I was surprised and dismayed to find out that that was not true. They don’t understand what Bermuda is all about. They continue to lump us in with other jurisdictions that are engaged in offshore banking that have secrecy laws, that are engaged in money laundering. These are things that Bermuda is not involved in.”
The Bermuda delegation had stressed to Mr Cameron that Bermuda and the other OTs had not been given a “fair opportunity” to examine the multilateral agreement that he wanted signed.
“It is important that you understand that Bermuda has not signed any agreement,” the Premier said.
“We need to be responsible, and in being responsible we must look at every ‘T’ and make sure that it is crossed and every ‘I’ to make sure it is dotted. Because we do not want to put in jeopardy the financial model we have in Bermuda.”
The Premier said Bermuda had no problem with sharing tax information and providing information about beneficial ownership of companies domiciled here, and had been doing so for many years.
“When it comes to the highest regulations, Bermuda has always been [among] the forerunners,” the Premier said.
But Mr Cannonier stressed that Bermuda’s model was not banking, but insurance. “It is the businesses that are domiciled here that pay out in billions of dollars to ensure that many of the places like the UK and the United States can get back up running again and can create jobs and sustain jobs and put them back in the positions they were in before these things (catastrophes) happen.”
He said: “There is a great misunderstanding about what it is that we do. So we will continue to ensure that we get the message out there.”
No other territories had signed the multilateral agreement, he said.
Asked if the UK Government accepted Bermuda’s request for more time, he said: “They have to.”
But the Premier stressed that a signing ceremony had never been on the agenda.
“Sovereign nations like the United States and Canada are still coming to terms with this global agreement, so it’s going to be a while before we all come to a consensus as to exactly the direction we want to go in. They also are looking at this very closely and they are being responsible as well.
“So as we move toward tightening up the net of illegal activity I’m sure that some agreements will be found, but right now we are not at that position.”
Asked about the efforts of companies like Google to avoid paying millions of dollars in taxes using vehicles domiciled here and in other countries, Mr Cannonier said Ireland’s double tax treaty was a key factor in enabling Google’s tax avoidance.
“Bermuda is down the chain. So if you want to avoid this thing happening, the UK, the G8 nations really need to go to Ireland and the likes and address them first.”
Mr Cannonier added that misrepresentation of Bermuda in UK media stories will end with better public relations.
Kangoocar :: June 18, 2013 6:38 pm
Thankfully we have a competent OBA handling our affairs!! I totally agree that we need to get the message out there that we are NOT a tax haven!!! We offer a platform that enables countries such as the US and others to have their citizens save money on insurance matters, which means when catastrophes do occur in their countries their people have affordable insurance to cover the costs!!! They do in fact know this and it is nothing more than political posturing to cover their own inability to have their day to day costs of running their own countries!! What we provide for them out weighs the lost revenue!!!!
32n 64w :: June 18, 2013 7:05 pm
"You have had it good for a number of years. What have you done with all the spoils of this industry during the last 20 years?"
This shows a clear misunderstanding of our tax system. There are no "spoils" or hidden caches of tax revenues hiding in bank accounts or under Parliament.
Stop trying to export your tax policies and expect other countries to be your collection agents. We are not paid servants of the IRS, CCRA or HMRC (as a starting point).
Don't criticize, condemn or confuse our progressive and functioning tax systems as one with your own.
Bermuda has a varied and fair tax regime that is rooted in an entirely different collection and measurement approach that shouldn't be ignored or overlooked simply because other countries are either unable or unwilling to adopt different mechanisms for themselves because its politically inconvenient.
We are not poster children for your bad decisions or failed implementation criteria. Stop blaming us for the ineptness of your own politicians who have crafted an environment built on the backs of special interests and narrow mindedness.
Our policies work for our country. If you don't like the results change your own methodologies and stop pointing the fingers at others. You need to own the problem and stop being nimbys about it.
Fezzer :: June 18, 2013 7:39 pm
@Davenport It's better to be assumed an *****, than open your mouth and remove all doubt!
The Uk need to sort out their own affairs before pointing the finger at us! Some people might claim that Britain is a tax haven compared to France, now that Hollandes socialist tax policies have been implemented, and some wealthy French people have left France for the uk, Russia etc!
Britain is not a banking island, we have 4 banks, and that is it, all which you can walk into on the high street! Cayman however have over 3000 banks which mostly are brass plate banks!
We have had tax information exchange agreements with the US and UK since the 80s and 90s respectively, we are currently on the white list of the OECDs ranking! We have one of the best anti money laundering laws in the world, the US and the UK on the other hand lol, where do you think the worlds money laundering happens, not in tiny bermuda, but of course New York and London, hence HSBC!
Our tax policy for our reinsurance sector is beneficial to the UK and the US as it lowers the cost of insurance for citizens in those countries. When 9/11 occurred about 70% of all payments in the aftermath were paid out by Bermudas companies! The same for hurricane sandy etc.
The UK should change its own laws if it wants companies like google and Thames water to pay its appropriate share of taxes!
Are you one of those who bought property under the impression that for 20 years you would pay no property tax? Guess again, because since you bought that expensive apartment and paid that real estate agent thousands of dollars in commissions, a lot of holes have been punched through that exemption.
Up to $30,000 in property value are still exempt, which is enough to buy a small parcel miles away from any supermarket.
This is why the current administration has embarked into an ambitious program to "update" assessed values in high-income neighborhoods - where coincidentally not many voters are residing to alter the political balance - and push them way beyond current resale value in order to levy property tax on them.
The Directorate of State Property Assets of the Ministry of Economy and Finance is publishing Edicts in the PanamaAmerica newspaper which serve taxpayers as notice of the assessment made in accordance with the Executive Decree No. 34 of May 3, 1985, as amended.
The Edicts contain the following information:
Assessment File Number
Number of farm
Name of Owner
Land value
Improvement value
Resolution number
With the publication of each Edict, the institution complies with the notification stage of these resolutions, ie no personal notice is required. This means that an absentee landlord may learn about the assessment when he or she asks for a tax clearance certificate and still has taxes due.
As for the effects of these decisions, it is important to note that in some cases these assessments are increased substantially, the values of the land and improvements of the real property of some taxpayers, implying an increase in the tax rate from the second quarter of 2013 , with the exception of cases where the properties by affected these appraisals are within the five (5) years during which the State can not vary the assessed value, as provided by Article 766-A of the Tax Code. As an example, in the upscale neighborhood of Punta Pacifica:
Finca PH 3357822BR 2703, measuring 153.07M2. in PH TOC (Trump Tower) increased from $171,223.56 ($1118.60/m2) to $430,480.95 (2812.31/m2), owned by Newland International Properties Corp.
Finca PH 362086U.I.- 801, measuring 203.94M2 in P.H. OCEANAIRE increased from $186,565.37 ($914.80/m2) to $451,087.09 ($2211.86/m2), owned by Corporacion Marbella, S.A.
Fortunately appeals for reconsideration against these resolutions can be brought within 15 working days from the day following the notification, when the term to bring appropriate legal remedies begins and, as applicable, to assert their rights as taxpayers. The appeals must be filed through a lawyer when the property is owned by a corporation or entity.
Owners of properties where Edicts for assessments have not been issued, a tax planner can propose freezing of property tax under certain circumstances allowed by several laws.
Colorado Gov. John Hickenlooper is heading to Panama with local tourism and business leaders Wednesday, hoping to increase trade with the Central American country and to work with officials there to launch a nonstop flight between Denver International Airport and Panama City.
The three-day trip will include a tour of Panama Canal improvements that were overseen by Douglas County-based engineering firm CH2MHill Inc., a breakfast with Panamanian business leaders and a meeting with officials from Tocumen International Airport, said Stephanie Garnica, the Colorado Office of Economic Development and International Trade’strade and investment director for the Americas...
Colorado now exports about $15 million a year in goods to Panama — a number that has gone up since the U.S.-Panama Free Trade Agreement went into effect in 2011 and is expected to continue to rise.
Because Panama is not a strong manufacturing company, Colorado companies have an opportunity to supply businesses there with high-tech and other goods they may need, Garnica said.
...
Executives from Teletech Holdings Inc.,Dish Network Corp., Liberty Global Inc. and CH2MHill will travel with government officials on the trip, looking for increased trade opportunities, Garnica said.
Colorado Tourism Office Director Al White and DIA officials also will go along, as part of the Denver airport’s ongoing effort to get a direct nonstop flight into Panama’s capital city, Garnica said.
Officials hope to use the trip to become more familiar with the needs of Panamanian business travelers, seeing the airport as both a travel destination and as a connection point to South America, she said.
The trip comes less than two months before the start of the 2013 Biennial of the Americas, a celebration of the Western Hemisphere scheduled to begin July 16 in Denver. Officials also will discuss that event with Panamanian officials.
For several years clients have been approaching us with typical Panama corporation Articles of Incorporation, accompanied with a typical Class A business license (in Spanish "Aviso de Operacion") claiming that this is a "financial services company". Several websites also promote this product:
For people looking to set up an offshore finance company, as they are commonly referred to, a Financial Services Company in Panama has proven particularly popular.
A “license,” known as an aviso de operacion in Spanish or “Operational Status” in English, can be obtained from the Panama Ministry of Commerce. This license allows the company to provide such offshore financial services as:
Payment Processing
Factoring
Bullion Trading
e-Currency Exchange
Asset Management
Financial consulting
plus a few other activities which can be added on request.
The aforementioned list of offshore financial services would be considered “unregulated” in Panama. Simply put, these do not require the more rigorous supervisory license necessary for businesses such as offshore banking, insurance, broker-dealer, lending, fiduciary and cash transmittal services, all of which have paid-in capital requirements. If you are looking to set up an offshore financial services company for these more rigorously-licensed business types, please contact us. Below we discuss the simpler “license” in more detail.
Previously issued as the “Type A Commercial License” by the Ministry of Commerce in Panama, the license now bears a new name, but is the same registration document for a business that, among other things, will be issued with a domestic tax ID number. This means that, in order to keep it in good standing, an annual tax declaration must filed, which will disclose that all income from the company was derived from external (non-Panamanian) sources.
From Sovereign Management & Legal blog
Another website touts:
Panama Licensed Financial Services company A Panama bearer share company with the special financial services license specially prepared to cover whatever financial services that do not require a more onerous license and are desired to be offered (e.g. electronic payment processing, debit card marketing / issuance, bullion trading, forex, factoring, leasing). This specially designed Type A Commercial License is useful for banking purposes and other situations which require proof of a license to handle third party funds. We prepare a carefully worded English translation of the Spanish original that then has an apostille affixed for use with banks
From LB
What sounds like a dream come true is actually an oversight in the overlapping of several Panama agencies dedicated to enforcing financial laws. The granting of the Aviso de Operacion allows owners of said company to fool foreign banks into thinking that they are entities supervised by a government financial regulator.
Firstly, there is no special type of entity in Panama laws called the "financial services company". The types of business entities are corporations, limited liability companies, partnerships and a few others based on their shareholder structure and liability. All Panama business entities or individual doing business with other Panama businesses are required to have an Aviso de Operacion business license, as opposed to pure offshore companies which do no business with other Panama businesses or are engaged in legal exceptions (such as landholding of one property). However, once the step is taken by a Panama company to have an Aviso de Operacion, immediate notice of its existence is given to taxation authorities such as the General Revenue Directorate, the Social Security Administration and the local Municipality which are able to inquire as to the nature of the activities by the Aviso holder.
Some of the other websites include several caveats about this product:
A license from the Ministry of Commerce can be obtained which can allow the company to provide such financial services as Payment Processing, Factoring, Leasing, Precious Metals Trading, Bill collecting and related services, Debit & Credit Cards, Trading in Gold, Silver, Platinum plus other activities which can be added on request. The company can further engage in any lawful enterprise, but the license is specific to the activities listed above. The most important activity for most clients is the Payment Processing. With this license, the company can demonstrate to any bank or other institutions and authorities, that the company is authorized to manage third party funds in its accounts. Many banks these days require that a company can demonstrate origin of funds and beneficial ownership. A company with third party funds in its account and no government issued license to show that demonstrates that it is authorized to hold and process such funds, will risk having its accounts frozen. This entity has proven indispensable for use in conjunction with licensed offshore bank entities.
Main Disadvantages:
Not a financial institution as such. This company should mainly be used for payment processing, usally for a financial entity registered in another jurisdiction. These licenses still do not allow the company to engage in securities (brokerage or investment fund), savings and loan (financiera) or fiduciary (trust company) services which are regulated differently and all require a different type of license with minimum capitalization (usually $500,000) and public audit requirements. The Panamanian government is very serious about this.
From Avia
Once this financial services company has the Aviso de Operacion, immediate notice is given effective 2013 to the Municipality of Panama city. They will levy a $50 monthly signage tax and every year thereafter there is the obligation of filing a Panama city tax return. A municipal tax on gross income is levied under a schedule, which has a general rate of 0.08%. The resident agent of the corporation must have received an email from their friendly Municipal tax collector reading:
Señor(a)
...
Ciudad
El Municipio de Panamá le da la bienvenida a su sistema de Atención al Contribuyente y le comunica que el negocio ... S.A, con domicilio en Edificio ... de conformidad al Registro Unico de Contribuyente otorgado por la Dirección General de Ingresos del Ministerio de Economía y Finanzas, ha sido clasificado e inscrito en el Municipio de Panamá, desde el dia 24 de abril de 2013, bajo el No. de contribuyente 02-2013-..., de conformidad al Aviso de Operación # ... otorgado por Panama Emprende del Ministerio de Comercio e Industrias y le comunicamos que será aforado con las siguientes rentas de conformidad al Acuerdo Municipal N° 40 del 19 de abril de 2011:
Orden Actividad Impuesto Forma de Pago
1 ROTULOS Año: 2013 25.00 ANUAL
De no presentarse en el término de quince (15) días, se le aforará de oficio con las rentas anteriormente descritas.
Una vez informado usted de las obligaciones que tiene con el Municipio de Panamá, debe apersonarse al Departamento de Atención al Contribuyente, en la planta baja de la Torre B del Edif. Hatillo, Alcaldía de Panamá, en un término no mayor de quince (15) días, contados a partir de la fecha de recibido de esta información, para entregar los siguientes documentos: ... IMPORTANTE:
Todo Contribuyente deberá presentar una Declaración Jurada donde se verifique con especificidad, la actividad lucrativa que se ejerce (Artículo 6, Numeral 2 del acuerdo 40 del 19 de abril de 2011).
Adicionalmente el Contribuyente deberá presentar una Declaración Jurada Anual del monto de sus ventas o ingresos brutos, obtenidos producto de sus operaciones en el Distrito de Panamá y que consten debidamente en los registros contables del contribuyente (Artículo 6, Numeral 3 del acuerdo 40 del 19 de abril de 2011).
La declaración jurada anual de ingresos brutos, a la que se refiere el numeral 3 del Artículo 6, deberá ser presentada dentro de los primeros noventa (90) días calendarios contados a partir de la terminación del período fiscal de cada contribuyente.
De no presentar la declaración jurada anual de ingresos brutos dentro del plazo establecido, será sancionado con una multa de quinientos balboas (B/.500.00) y con el cierre del establecimiento comercial hasta tanto no se presente la declaración jurada anual correspondiente y pague el monto adeudado (Artículo 7, del acuerdo 40 del 19 de abril de 2011).
Puede realizar sus pagos en todas las dependencias del Municipio de Panamá, ya sea en efectivo o por medio de tarjeta de crédito.
Fundamento de Derecho: Articulo 84 y 87 de la Ley 106 de 1973, modificada por la Ley 52 de 1984; Articulo 4, 6,7, 10 y 77 del Acuerdo 40 de 2011 y Artículo 1, 3 y 6 de la Ley 5 de 2007.
Alcaldía de Panamá
Since may resellers of Panama companies abroad have scarce knowledge of Panama tax law (other that foreign source income is generally free of income tax), they rarely mention that new changes to the Tax Code may also involve paying dividend tax when an Aviso de Operación is applied for. Under Article 733, Panama companies must withhold 5% as tax on dividends even if they are paid out to shareholders out of foreign-source earnings:
Excepto por lo dispuesto en los literales b, d, h y k del presente artículo, solamente aquellas personas jurídicas que requieran Aviso de Operación para realizar operaciones comerciales e industriales dentro del territorio nacional, conforme lo dispuesto en la Ley 5 de 2007; ... quedan obligadas a retener el Impuesto de Dividendo o cuota de participación ... del cinco por ciento (5%) cuando se trate de la distribución de utilidades provenientes de renta exenta del Impuesto sobre la Renta prevista en los literales f y l del artículo 708 del Código Fiscal, así como de rentas provenientes de fuente extranjera y/o de exportación.
.
Issuing bearer shares involves a higher dividend tax of 20% and even if no dividend is declared a 40% tax is payable on net earnings:
No obstante lo dispuesto en este artículo, los tenedores de las acciones al portador pagarán este impuesto a la tasa del veinte por ciento (20%).
La persona jurídica que distribuya tales dividendos practicará la retención, la que tendrá carácter definitivo. En caso de que la sociedad que distribuya dividendos tenga diferentes clases de acciones, el impuesto se pagará de conformidad con las tasas aquí establecidas y según el tipo de acciones.
Cuando la distribución sea menor del cuarenta por ciento (40%) de las ganancias netas o en caso de que no haya distribución, se aplicarán las disposiciones del impuesto complementario, con independencia del tipo de acciones que haya emitido la sociedad.
Not all is darkness for the companies with Aviso de Operacion. The entry into force of double taxation agreements (DTAs) with several OECD countries and major business partners provides an opportunity for timely transfer pricing savings when proper advice is sought. Although the likelihood of Panama tax authorities seizing bank accounts abroad of these Panama financial service companies is very low, it is better to factor in these risks when using these companies.
According to local daily Estrella de Panama, the Executive Power decided to freeze the bill to immobilize bearer shares, amid the publication of articles in the international press which reveals the identity of thousands of owners of bank accounts in tax havens, including Panama.
This was announced by an official of the Ministry of Economy and Finance (MEF) through an email sent to the bankers on 2 April and which was seen by a reporter of the daily.
'Following instructions from Minister De Lima, I inform you that we have reported not to go forward with the approval of the bill whereby custody regime applicable to bearer shares is adopted . We appreciate the support and time spent in pursuing this initiative. ' says the email. Three bankers who asked that their names be withheld confirmed the existence of the email.
Bill 568, whereby bearer shares are immobilized, came to the National Assembly by the hand of the Minister of Economy and Finance, Frank De Lima, on February 27 along with three other projects: the amendments to the law prime interest, the law of the Panama Investment Fund and the creation of the National Revenue Authority. However, bill 568 only reached its first reading. The members of the Committee of Finance met only twice to hear arguments for and against the initiative. The largest association of lawyers - the Panama Bar Association - and several important law and business associations have been against the custody, while a few law firms (Mossfon and a few others already with custody licenses in BVI and elsewhere) and the banking sector have expressed their support. The last scheduled meeting for discussion of the bill was before Easter. Currently, the discussion was not on the agenda of the committee.
Last year, Australian business professor Jason Sharman made a comparative assessment of Panama’s compliance with international OECD transparency standards of corporate beneficial ownership with special reference to bearer shares. Panama’s compliance with beneficial ownership standards was judged relative to the legal standards and actual practices extant in major OECD competitors, especially the United Kingdom and the United States. He found that Panama's compliance measures exceeded those in place in OECD countries and made unnecessary the immobilization of bearer shares. England LLC bearer warrants and U.S. Wyoming bearer scrip continue being allowed as corporate bearer instruments.
What is the "right" amount to charge for a legal assignment? After all, the client only sees the lawyer making notes and nodding during meeting or reads the lawyer written summaries. What is not seen are the hours reviewing paperwork, drafting more paperwork, conducting research at government registries or dealing with bureaucrats who want to be elsewhere (until they get fired when a new President comes with his people). And with Panama real estate, buyers often get into trouble after gladly paying thousands of dollars to real estate agents (yes, their commission is hidden in the jacked up price of that flat or parcel) and "saving" hundreds in having their contract reviewed by a competent bilingual attorney in the country of the property.
A Canadian lawyer and SFU professor explains that in the Great North a lawyer may bill $300 an hour, yet I have found real estate buyers willing to pay a 150% markup on property no Panamanian would buy at that price but balking at the rates in the Panama 2001 Schedule. Some even expect lawyers to take a loss and not pay if a deal goes South, as if clients were also going to share profits with the lawyer if the deal goes very well. All this why expecting lawyers to pay for employees, prime office square footage, IT equipment and put them at the service of the client. Lawyers in large cities have been guilty of overbilling, which combined with lack of transparency creates suspicion from the client.
In the end, lawyers - like doctors, financial advisors, plumbers work in a market and no client is forced to use a specific lawyer. Caveat (that Latin thing): DIY lawyering in a foreign language is as successful as DIY medical treatments - some work, most don't.
How legal fees work
TONY WILSON
Vancouver — The Globe and Mail
Published
Last updated
Ahhh legal fees. Its amazing how this issue often spoils the relationship between lawyers and clients, creates fodder for late-night comedians, yet has vastly improved the standing and reputation of sharks in our oceans. So let’s talk about legal fees, so you have a basic understanding of what’s charged, why it’s charged and what you can do if you don’t like what’s charged.
LWhy? Because you charge for what you sell. So do we. Like you, if we don’t charge legal fees, we couldn’t afford to pay the rent to our landlords, the salaries to our employees, our payroll and other taxes, our computer, copier, and technology leases, our utilities bills, our lines of credit and the numerous other costs and charges that every business - no matter what it sells - has to pay to stay alive. And we wouldn’t be able to pay our own mortgages and all that we want to do with our personal income, given the many, many, many years we spent toiling in University and Law School without one. Like it or not, as much as it’s a profession, law is also a “business” and if businesses don’t earn a profit, they wont be in business very long. Numerous legal decisions through the years have allowed us to charge a “fair fee” for our services. But when the best and brightest new lawyers one year out of law school are demanding (and getting) somewhere near $100,000 per year in Vancouver and Toronto, “fair” won’t always mean “cheap”. Lawyers can charge fees in a few ways. Motor vehicle accidents and some other insurance claims are often done on a contingency fee basis, where the lawyer’s fee is a percentage of the monetary award paid at the end of the day, although this is rarely done by business lawyers or those doing commercial litigation. But you never know. Maybe a particular lawyer may consider a contingency fee arrangement for a commercial law matter in a particular situation. Some things lend themselves well to “flat fees”, like simple incorporations, simple wills and simple real estate conveyances, although if the job becomes more complicated than “simple,” the hourly rate may apply. But ask your lawyer about flat fees. All they can say is no. Or yes. Normally, legal fees are charged on an hourly rate that reflects the lawyer’s years practicing at the Bar; a more senior lawyer charging more than a junior one because the former has more experience. The lawyer will input the time he or she took to do certain functions in tenths of an hour, so if a telephone call about a matter (excluding pleasantries) was 12 minutes long, that should be recorded as a point 2 and multiplied by the lawyer’s hourly rate. If a letter to opposing counsel took 30 minutes to draft, that should be recorded as a point 5 times the lawyer’s hourly rate. And so on. Legal work in larger offices should be done by a person in the office whose hourly rate is the most appropriate and efficient for the function. A paralegal, junior lawyer or articling student with lower rates may well be able to deal with certain functions less expensively for the client than the senior lawyer with a higher hourly rate (i.e. legal research by an articling student; a court application by the junior etc.). So canvas this issue with the law firm you want to use as the lawyer you’re dealing with may be too expensive for you, but others in the office may be billed out at just the right rate. I’m always asked, “how much do you charge per hour?” for what I do, but when you think about it, this is often the wrong question to ask a lawyer. Hourly rates are part of the equation of what a legal bill will be, but they aren’t the only part of the equation. It’s often hard for the lawyer to judge at the “get-go”, what the final bill will be for a particular legal function until the job ends because of uncertainty beyond the lawyer’s control. This applies to what litigation lawyers do as much (or more) as it applies to what business lawyers do. It always depends. From the litigation side, if discoveries take four days rather than the expected two, or the other side is making protracted procedural or other applications before trial, or the trial goes on longer than anticipated, (to name only a few examples), this will lead to higher legal fees, because it’s a function of the lawyer’s time to deal with these additional complications. Likewise, from the solicitor’s side, drafting or reviewing complicated documents will take longer than drafting or reviewing simple ones. Modified instructions from the client part way through the deal, or the deal going off the rails, or extensive negotiations to keep the deal alive, or legal requirements imposed by federal or provincials laws, or legal requirements imposed by previous judicial decisions, or an unreasonable lawyer on the other side of the file, or a multitude of other problems along the way will take longer to deal with and will cost more legal dollars than if the complications didn’t happen. But $300 or $400 per hour doesn’t give the client much certainty in terms of what the final bill will be, does it? So the best thing to do is to try to deal with a lawyer who regularly does the kind of work you need done (in most provinces, we can’t say that we “specialize,” even though, in all practicality, many of us do) and ask the lawyer what the range of fees are expected to be for a particular function, agreement or transaction. If the lawyer has “done this kind of work before,” the lawyer should have a fairly good idea of the fees that can be expected at various stages of the engagement, and the things that, in his or her experience, can often send fees higher. I tend to give a range of what I expect for particular documents I draft or particular stages of the engagement, and because I’ve done it before, I generally know what to expect. But if it goes off the rails, or the matter involves more time than I expected, the fee may be higher. My clients will be informed of this hike in my engagement letter, so it’s totally transparent. Engagement letters are the norm now in British Columbia and other provinces. It’s a contract which spells out what the law firm will do, what it won’t do, and what it will charge for its services. It will normally set out the hourly rates of the lawyer (or lawyers) doing your work, and it might include an estimate for handling the matter (or handling stages in the engagement). Disbursements (that is, the law firm’s out of pocket expenses) will be accounted for, and added to the bill. If you have a problem with postage, photocopying, long distance telephone charges, and printing costs, deal with the lawyer at the time of the initial engagement so everyone knows what the deal is and what it isn’t. Frankly, the bigger your file is, the more clout you may have to negotiate these things. But remember, the lawyer you “negotiate” with can still say “no thanks, find someone else”. A payment in advance or “retainer” is often requested if the client is new to the firm. It’s drawn during the engagement, and if the matter costs less than the retainer, the balance is returned. If it costs more, then the lawyer may well ask for the retainer to be replenished before doing any more work. If your legal bills are over the terms of the engagement letter or the invoice (i.e. net 30), the law firm will have the right to stop work until its paid unless other arrangements are made. If the accounts are over 60 or 90 days, law firms may well involve a collection agency or start an action to recover fees. You’d do the same thing with accounts receivable in your business, so why shouldn’t we do it in ours? You aren’t a bank and neither are we. Certainly an even better practice is for the lawyer to communicate with the client regularly about fees so there are no surprises, and for the client to deal with the lawyer over an account it doesn’t agree with so the issue doesn’t linger. It’s up to the lawyer as to whether he or she will charge for an “initial consultation.” Usually when I get a “cold call,” it’s from someone who’s read my books, articles and other publicly available information on the Web. I’ll often spend quite a bit of time with them on the phone for free just to save them from having to fight downtown traffic and pay for parking. But I’ll have to make a judgment at some point during the call whether I’m talking to someone who’s just shopping around for free advice. Telling them at some point in the call that to go further, I’ll need them to sign an engagement letter and pay a retainer will separate the tire kickers from the serious clients, because at some point, I have to get back to the work that pays the bills. I don’t believe lawyers should be “taxi drivers” and bill their time for every second they work on a file. Time on a file should be a guide only, and on large projects there’s always give and take, because usually, you don’t want the client to fire you and find another lawyer. I’ve had a lot of the same clients for 10 years or more, and if there’s a big bill, we always talk about it before I send it; in part, so we can massage the amount before it goes out, and also because clients like to be kept informed and included in the decision. My clients also pay right away when they’ve agreed on the bill before it formally goes out. Communication is the key to happy clients, and lawyers. Lawyers can charge more than their hourly rate if the service was worth more. So if 15 minutes of my sage advice saved a client $500,000 because of my knowledge and experience, I’m entitled to charge more money based on the value that I’ve provided. That’s because the advice was worth more than $100 and saved the client a bundle. But you might have a dispute with a lawyer about an account. Every province has a way that clients can challenge the legal fees charged by lawyers, and judicial officers are charged with assessing whether an account is a fair fee in the circumstances. The law society in your Province will have a tab on its web page about how to challenge a lawyer’s account. You can always fire your lawyer if you aren’t happy, and if you aren’t getting good, responsive service or good advice at a fair fee, you should. However, your lawyer has no obligation to forward your file to you or your new lawyer unless the old account has been settled. Your new lawyer may not be able to do anything without the old file, but that’s the point. It’s called a solicitor’s lien, and it’s quite normal. Finally, lawyers can fire our clients too. I’ve done it a few times, very politely, over the past 25 years when clients are unreasonable, disrespectful or don’t pay their accounts, and it still amazes me how upset they get when it’s me that does the firing. “You can’t do that!” they say. Oh yes I can. It’s a relationship, and it has to work both ways. I like what I do and I really like my clients. But life’s too short to work for people I don’t want to work for.
Special to the Globe and Mail
Vancouverfranchise lawyer Tony Wilsonis the author of Buying A Franchise In Canada – Understanding and Negotiating Your Franchise Agreement and he is ranked as a leading Canadian franchise lawyer by LEXPERT. He is head of the Franchise Law Group at Boughton Law Corp. in Vancouver and acts for both franchisors and franchisees across Canada, many of whom are in the food services and hospitality industry. He is a registered Trademark Agent, an Adjunct Professor at Simon Fraser University and he also writes for Bartalk and Canadian Lawyer magazines.
Are powers of attorney granted by a corporation made void when its legal representative is changed?
This is irrational because then a corporation would be able to shake the obligations incurred by a previous attorney-in-fact just by switching legal representatives.
A corporation is a type of entity in Panama and as a juridical person that it is, it has to appoint an individual (or natural person) to act on its behalf. While natural persons can act on their own behalf, Article 73 of the Civil Code specifies that juridical persons like corporations “shall be represented judicially and extra-judicially by the natural persons which the laws, or the respective by-laws, articles of association, regulations or foundation deeds determine; and upon said determination by the persons which a resolution of said community, corporation or association, appoints for said purpose”.
This provision applies also to corporations, which Corporation Law (Law 32 of 1927) specifies in Article 63:
Article 63. Directors may be removed at any time by the votes, cast to that effect by the holders of the majority of the subscribed shares with a voting right in the elections of directors. Officers, Agents, and employees may be replaced at any time by means of a resolution adopted by the majority of the Directors or in any other manner provided by the articles of incorporation or by-laws.
The law does not say that the changing, incapacity or death of a legal representative or director results in the powers of attorney that he granted in the past on behalf of the corporation becoming void. Being the attorney-in-fact of a power of attorney an agent of the corporation, they are replaced by a decision of the board, not because new directors have been appointed.
Does a corporation which authorizes its Legal Representative in its charter to appoint attorneys-in-fact, also need a shareholder resolution? The charter of said corporation states:
The Board of Directors may likewise elect other officers, agents and employees it deems convenient. Any person may be in charge of more than one office. The Legal Representation of the corporation will be exercised indistinctly by the President, the Secretary or the Treasurer, acting individually. The legal representative may grant General Powers of Attorney in favor other individuals or entities to exercise all powers on behalf of the corporation including, without limitation, to desist, settle, substitute and delegate.
The Panama Corporation Law specifies in Article 65 that:
The Corporation shall have a President, a Secretary and a Treasurer, who shall be elected by the Board of Directors, and it may also have all such officers, agents and representatives as determined by its Board of Directors, by-laws or articles of incorporation, same being elected in the manner established therein.
This is a case which illustrates why it is important to read the charter when determining the scope of corporate authority of a Panama corporation. In the specific case of the question, the charter has a special clause stating that either one of the President, the Secretary or the Treasurer, acting individually (meaning without the need of a shareholder or board resolution providing authorization), may grant a General Power of Attorney in favor of other individuals or entities to exercise all powers on behalf of the corporation. These powers include those which other articles of the Civil Code specify requires an express authorization: to desist, settle, substitute and delegate said power of attorney.
The Civil Section of the Supreme Court of Justice has stressed in an unusually candid decision that absurd decisions by public officials should not get in the way of a legal representative as long as he is acting as authorized by the letter of the corporation charter:
It does not seem adequate or correct that the judge, in the absence of direct and express provisions with regard to a specific matter, is allowed to absurdly reason and interpret legal provisions. And that would be precisely what would happen if the legal representative of a corporation was denied, the right to act on behalf of the interests of said corporation, as long as the acts performed as comprised within the corporate purpose and are related to the own development of the corporation represented. Remember that in private law matters anything that the law does not prohibit may be done. If the Law nor the corporate charter of [the corporation] prohibited [the legal representative] to participate in the shareholder meeting of [another corporation] as proxy of [the corporation], the Court does not see a reason to annul the results of said meeting. (Decision of February 13, 1996, MGRevilla vs CDH, S.A.)
Is a Power of Attorney granted by a corporation to be in force from May 29, 2007, to May 28, 2008, illegal because it was granted on May 25, 2007?
Powers of Attorney are forms of mandate, which like any civil obligation may be conditioned in their scope and also their duration. Many provisions of the Civil Code support the execution of a power of attorney for its exercise in a future date:
Article 999 provides that in a conditional obligation the acquisition of rights, as well as their resolution or loss, depend on the event which constitutes the condition. In the case of the question, the acquisition of rights is conditioned to the elapsing of May 29, 2007, date when the attorney-in-fact will become empowered to exercise, even if the document was granted 4 days before.
Article 1002 provides that the condition that an event occur extinguishes an obligation from the date it elapses. By being the power of attorney granted until May 28, 2008, the elapsing of said date terminates the powers for said attorney-in-fact. However, some case law provides that mandates are automatically extended if their duration ends without a resignation by the attorney-in-fact or substitution by another one (Decision of August 18, 1991, quoted in Dulio Arroyo, 20 Años de Jurisprudencia de la Sala Civil, Panamá, 1982, p. 300).
Article 1010 states that obligations which have a definitive date set for their performance, will only be demanded when said date arrives. Therefore, the grantor may be able to demand on May 29 that the attorney-in-fact perform the accepted power of attorney.
Legal doctrine acknowledges the legality of conditional obligations and explains that dates can be used to suspend obligations or to resolve or terminate them. In the specific case of article 1010, “this does not mention a suspension term but the existence of an initial term is given, since it is the moment when the effects of the obligation begin. However, when the solution or performance of the obligation is delayed, the creditor may not exercise his action before the term arrives, except in the case of what has been made for its own benefit, since if nothing has been established, it is supposed to be for the benefit of both parties.” (Bonifacio Difernan, Curso de Derecho Civil Panameño, Panamá, 1981, p. 138)
When a power of attorney is granted by a corporation, additional rules of the Commercial Code are applicable:
Article 580A was enacted in 1997 and in addition to stating that general powers of attorney do not need to be registered unless they authorize changes to title over real estate, also states that Powers of Attorney are valid from valid from the date they are granted in public deed or private document with a date confirmed by Notary Public.
However, Article 581 states that when a power of attorney was made according to rules or instructions, these will be integral part of that one. This means that if this case the document contained a limitation in its duration whereby the attorney-in-fact can only act as such from May 29, 2007, to May 28, 2008, even if the document was granted before Notary 4 days before. The anticipated execution certainly does not make the power of attorney illegal.
Sample powers of attorney in English with with a future date of effectiveness are available online for Illinois and Utah.
Mandates are terminated by their revocation, resignation of the attorney-in-fact, or death, incapacity, bankruptcy or insolvency of grantor or attorney-in-fact. This is the reason why in most civil law countries, living wills drafted under Common Law rules need to be redrafted for their enforcement in Civil Law countries.
Do General Powers of Attorney granted by a corporation need to be registered?
No. A prevalent practice among Panama banks (Caja de Ahorros and others) is to demand that General Powers of Attorney be registered in the Public Registry. This seems to be a remnant of what was a legal requirement Articles 57 (Section 7) of the Commercial Code and 1776 (Section 7) of the Civil Code for 90 years until Law Decree 5 of 1997 revoked said requirement. Said Law Decree enacted a Article 580A to the Code of Commerce stating that general or special powers of attorney ("mandato") are valid from the date they are granted in public deed or private document with a date confirmed by Notary Public and may be optionally registered in the Public Registry.
If the choice is made to register a power of attorney, revocation of the registered power of attorney must also be registered unless it is not required from the text of the original document. However, Article 1776 (8) of the Civil Code still requires registering a power of attorney for the sale or encumbrance of real estate located in Panama.
Since corporations are commercial entities the Commercial Code is applicable, so another merchant such as a bank may require under its Article 592 that the written power of attorney be shown. However, this still does not make compulsory under Panama Law the registration of a general power of attorney.
The First Superior Tribunal of Justice decided an appeal by stating that a deed containing a power of attorney granted between individuals to manage a property (excluding its sale or encumbrance) did not need to be registered because
“said power limits its representation to matters and acts related with [a specific property in one building] and not to all matters of the grantor, and as consequence of which we can conclude that its registration in the Public Registry is not a requirement for its validity, since it is not a general power of attorney in the terms of the Law” (Decision of August 30, 1991, IHMojica v JOvadia et al, quoted in Jaime Jovane, Jurisprudencia Civil al Dia, Panama, 1993, 419-420)
In the end, an attorney qualified in the jurisdiction of the corporation and another where the power of attorney will be used must examine all corporate and attorney documents to make a determination on how to proceed.
For more information see:
Legispan law database http://www.asambl ea.gob.pa/main/LegispanMenu/Legispan.aspx
Infojuridica law database http://infojuridica.proc uraduria-admon.gob.pa
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Bill 568 is being discussed which would require that bearer shares of Panama corporations be held in custody by a Panama lawyer, trustee, bank or foreign authorized banks. Panama Bar Association (Colegio Nacional de Abogados) which comprises the majority of Panamanian attorneys, the Lawyers' Guild Movement (Movimiento Gremialista de Abogados) and Inter-American Bar Association Panama chapter and the largest law firm in Panama Morgan and Morgan, directly reject the initiative as a threat to the competitiveness of Panamanian legal structures. The bill allows foreign banks to serve as custodians of bearer shares, which would then be subject to Panama confidentiality laws and veil piercing laws of their home countries.
Other law firms with a total of 250 attorneys, as Arias, Fabrega & Fabrega-the oldest of Panama; Mossack Fonseca & Co., Aleman, Cordero, Galindo & Lee, Alfaro, Ferrer & Ramírez; Galindo, Arias & Lopez, Arias, Aleman & Mora and attorneys Icaza, Gonzalez-Ruiz & Aleman, are in favor of restricting bearer shares as confirmed by Jaime Alemán of Aleman, Cordero, Galindo & Lee. These law firms incorporate a substantial number of entities and have offices in British Virgin Islands (BVI) and other jurisdictions where bearer shares are already subject to immobilization with a limited number of custodians.
The Panamanian Association of Business Executives (APEDE) has also rejected the initiative.
Last year, Australian professor Jason Sharman made a comparative assessment of Panama’s compliance with international OECD transparency standards of corporate beneficial ownership with special reference to bearer shares. Panama’s compliance with beneficial ownership standards was judged relative to the legal standards and actual practices extant in major OECD competitors, especially the United Kingdom and the United States. He found that Panama's compliance measures exceeded those in place in OECD countries and made unnecessary the immobilization of bearer shares. Full text in http://www.laestrella.com.pa/online/impreso/2013/03/08/acciones-al-portador-provocan-divisiones.asp See also Attorney discusses restrictions on bearer shareshttp://mypanamalawyer.blogspot.com/2012/11/attorney-discusses-restrictions-on.html
U.S. East Coast ports are rushing to upgrade aging infrastructure to serve cargo carried by post-Panamax ships expected to make their way after the Panama Canal expansion concludes.
The Western Coast of the United States has always been known for its historically bustling ports and empire of cargo ships and manufacturing industry. However, in 2014 many are predicting a major shift from the West Coast ports to East Coast ports. The shipping industry has recently made a move towards bigger ships. These mega container ships are called “post-panamax” ships because of their larger size. This large size also prevents these ships from safely navigating the Panama Canal forcing shipping and unloading to occur mostly on the Western ports of the United States. Due to an Oct. 22, 2006 referendum, Panamanians approved the Panama Canal Expansion Project which will add a third set of locks allowing the Panama Canal to handle the so called “post-panamax” ships safely and other ships that are more than twice as large as today’s ships easily. This widening of the Panama Canal will promote many shipping companies to make a move from the overcrowded Western ports to the now easily accessible and more efficient ports of the East Coast.
The South Carolina Port Authority is currently preparing for this invasion of giant cargo ships. Already, there are plans in the works to expand the port of Charleston. Also the South Carolina Port Authority has stated that the Charleston port is already “big-ship ready” with a harbor capable of handling up to 47 feet of draft. In fact the Charleston port has already handled one of the world’s biggest ships, the MSC Rita. The MSC Rita steamed into port in February of 2010 with a nearly 48-foot draft and is capable of carrying about 8,100 20-foot-long shipping containers. The South Carolina Port Authority has also stated that the expansion will not just be a simple add-on to the port but the expansion will be with long-term goals for the future of the Charleston port in mind. The South Carolina Port Authority has already received federal funding in order to do more reconnaissance and study to further deepen the port even more for future heavy cargo ships to easily pass through the port. The Charleston port is gearing up for a surge of incoming ships in 2014 due to the widening of the Panama Canal but the Port Authority is on top of everything, assuring industrial leaders that Charleston will be ready.
See also: Charleston, rest of port industry awaits Panama Canal expansion Trade conference covers Panama Canal, labor updates Southern Carolina International Trade Conference - Sep 9-11, 2013
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