Payment Terms and Financing Options to Maximize Sales While Protecting Against Nonpayment
Despite the size of the Panama market – and the fact that Panama uses the U.S. dollar as its currency - many U.S. exporters are unsuccessful in selling to Panama or increasing their exports to Panamanian buyers. Frequently, U.S. exporters lose sales due to the payment terms they demand of their Panamanian buyers.
U.S. exporters should be aware that Panama's lending rates are far higher than those faced by companies in the U.S. They are losing sales to Panamanian buyers because they are frequently demanding payment either by Confirmed Letter of Credit or Cash In Advance. This can result in the following situations:
1. U.S. exporter fails to win new sales contracts or loses existing Panama clients because other foreign competitors are willing to provide the Panama buyer with open account terms. Some Panamanian companies pay more just to get 30 or 60-day open account terms.
2. U.S. exporter sells less to a Panamanian client. One Panamanian company interviewed stated that it would purchase four times as much from its U.S. supplier if it were given 90-day terms rather than having to pay cash in advance.
3. U.S. exporter loses medium term sales contract because a foreign competitor assists the Panamanian buyer in achieving better financing terms.
While it is prudent for U.S. exporters to insist on secure payment terms, it pays for them to consider the broad variety of payment terms available to them in order to become as competitive as possible.
The purpose of this guide is to identify the main financing and payment mechanisms available to support U.S. exporters selling to Latin America in general and to understand the cost, advantages and disadvantages of each mechanism. This guide is an introduction and the reader is encouraged to use it as a starting point in order to become more familiar with the subject. In many instances, the use of expert help is recommended. To that end, the following mechanisms will be examined in this report:
1. Cash In Advance;
2. Confirmed Letter of Credit;
3. Open Account Terms;
4. Open Account Terms with Export Credit Insurance;
5. Documents Against Payment (D/P) & Documents Against Acceptance (D/A);
6. Export Finance by a US Commercial Bank (US$ denominated);
7. Import Finance by a Latin American Bank (Foreign Currency denominated);
8. Lines of Credit Available from Latin American-based Development Banks;
9. Sales to foreign public sector buyers with foreign Central Bank Guarantees are also addressed.
This guide was authored by the U.S. Commercial Service and funded in part by donations from PNC Bank and FedEx, U.S. Commercial Service Partners.
The guide is published in English (for U.S. exporters) and in Spanish (for you to share with your Panamanian buyers).
We keep receiving queries from people who purchased companies through offshorelegal.org and Panama Legal. Those are generic names for websites with great SEO reach.
Each Panama corporation is required to have a resident agent. Under Panama law:
- The law firm must have the name of its partners under the Code of Ethics.
Generic names like Panama law or similar should raise red flags with a prospective buyer of Panama corporations. If these resident agents have no permanent office, this can be a problem for the shareholder of the company when KYC is needed from the nominee directors when opening bank accounts. Bank constantly are required to update information they have on corporate shareholders, so a general power of attorney may not be sufficient to comply with bank requirements.
With offshorelegal.org the trail stops with its dissolution. Previously it listed several cellphone numbers and a toll free Panama number. No lawyers or names are described in its archived website but the Public Registry shows 2 lawyers as its members. Their Panama office at OBP is now occupied by a building company.
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.
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
You do not need a lawyer to do your property tax. If you are computer proficient and can follow some Spanish with Google translate, you can go to www.dgi.gob.pa and:
- get a NIT password to see your annual property tax statement online and print tax certificates online,
- download the eTax 2010 software from which can help you estimate payable capital gains and property transfer taxes in case of a sale.
Alternatively, CPAs are better at estimating taxes than lawyers, who can be of help if a claim against the Ministry is involved. Property tax rules change a bit every year. Some rules are posted at: http://mypanamalawyer.blogspot.com/search/label/property%20tax
--- On Tue, 7/6/10, maukapete <maukapete@yahoo. com> wrote:
From: maukapete <maukapete@yahoo. com> Subject: Americans In Panama - Panama Property Tax Lawyer Date: Tuesday, July 6, 2010, 11:01 AM
Does anyone know a Panamanian lawyer named N who does property taxes for homes? If no one knows Lic. N, does anyone know a Panamanian lawyer who does property taxes without jerking me around? Pete Peterson
A decision from a Panama arbitration panel upholds rights of foreign property buyers against local real estate developers.
Panama City, Panama ---- The Panama Center of Conciliation and Arbitration rendered an interesting decision regarding a purchase contract involving local companies as sellers and U.S.-resident foreign nationals as buyers of an apartment in Panama City. The decision is an exception to a string of abuses committed by local developers against foreign investors.
The economic group which developed and sold the residential apartment project and its individual architect as member of said economic group were condemned indistinctly to pay to the foreign promissory buyers the price of the property plus interest until the actual day of its payment, as remedies for damages caused by the defendants for an unilateral breach of the contract, with bad faith being found in their behavior.
The promissory sellers failed to communicate the promissory buyers when the construction of the project began in order to collect the second installment of the purchase price of a condo unit, as required by a promise contract which only stated “second payment must be made 30 days after construction begins”.
Instead, the sellers disposed of the condo unit and sold it to a third party –when the promissory buyers were on time to make the second payment. The promissory buyers later received a letter from the developer informing of their unilateral decision to end the contract because payments were not received in a timely manner which allowed for early termination. The developer offered to return the deposits only if the promissory buyers signed a liability waiver.
Lombardi Aguilar & Garcia in Panama served as legal counsel for the promissory buyers. The legal team of the firm included Guadalupe Martinez-Casas, an attorney with experience in international arbitration cases before fora such as the Court of Arbitration for Sport (CAS) in Lausanne, Switzerland. Ms. Martinez-Casas is a foreign law consultant in Argentine law, who previously served as attorney at the Buenos Aires firm of Llerena & Asociados. She is a graduate of Universidad Latina de Panamá (MBA), Universidad Torcuato di Tella (LLM and Economics), and Universidad de Buenos Aires - UBA (LLB).
About Lombardi Aguilar & Garcia Lombardi Aguilar & Garcia was created as an alternative for clients worldwide who seek fast, innovative and effective solutions to their legal problems. The firm currently provides services to individual and corporate clients in Panama as well in the Americas, Europe and Asia. Its partners maintain a commitment with professional ethics and social responsibility by participating in the board of directors of groups such as the Panama Bar Association, the German and the American Chambers of Commerce (AMCHAM) of Panama, and the Association of Chinese-Panamanian Professionals (APROCHIPA).
The firm centers its law practice in private client services and asset protection (Private Interest Foundations, Trusts), business structures (Offshore Corporations), tax planning, real estate and e-commerce. It also advices in areas of Law such as Corporate, Commercial, Intellectual Property, Maritime, Tax, and Immigration Law as well as related litigation that may arise.
For more information, contact +507 340-6444, +507 66388707, e-mail aaguilar (at) nysbar.com, or see: Lombardi Aguilar & Garcia http://www.laglex.com/
Keywords: Panama, real estate, property, investment, litigation
The Honor Tribunal of the Panama Bar Association published an ad serving several lawyers about the malpractice cases against them. Service had to be made through a newspaper because the lawyers could not be located or refused to be served in person.
TRIBUNAL DE HONOR COLEGIO NACIONAL DE ABOGADOS Edicto Emplazatorio No.02- 24-10-2007
El Tribunal de Honor del Colegio Nacional de Abogados, ordena la notificación por edicto de los siguientes abogados denunciados por supuestas faltas a la ética, los cuales no le ha podido surtir la notificación personalmente:
MANUEL E. CAJAR, DENUNCIA PRESENTADA POR: JOSE ANTONIO ALVAREZ
GASTON GARRIDO, DENUNCIA PRESENTADA POR: CARLOS MARIO ZAPATA AREIZA
CARLOS ARTURO DE LA ROSA, DENUNCIA PRESENTADA POR: ALVARO GOMEZ GOMEZ
CESAR GUARDIA, DENUNCIA PRESENTADA POR: MIRANY DE RAMIREZ
LUIS ALFONSO PALACIOS PRESENTADA POR: DORIS SORIANO DE PINILLA
Copia de este edicto será fijado de manera visible en el Colegio Nacional de Abogados y publicado por una sola vez en la gaceta oficial.
Se advierte a los abogados denunciados, que de conformidad con el artículo 16F del Reglamento Interno del Tribunal de Honor, la notificación se entenderá hecha transcurridos 30 días de la publicación en gaceta oficial del presente edicto.
Several attorneys were served notice of several complaints filed by disgruntled clients before the Honor Tribunal of the Bar Association. These attorneys had avoided service so they were served through a public notice posted at the association offices.
Getting around and understanding the law in Panama with Alvaro Aguilar. Alvaro is with the Panama based law firm Lombardi Aguilar & Garcia. www.laglex.com LISTEN NOW ON MP3
THIS WEEK ON THE EXPAT RADIO SHOW
We return to the exotic country of Turkey to interview with author, former US Marine and leadership consultant now living in Istanbul, Jim Stroup.
Also featured is Alvaro Aguilar of the law firm Lombardi, Aguilar & Garcia (www.laglex.com), on buying real estate in Panama.
Brendan Sharkey from HTH Worldwide (www.hthworldwide.com) talks about global insurance for expats. Tai is joined by co-host Ms Greta Elias. Greta's website is: www.greataelias.com
THE EXPAT SHOW is heard weekly 12:30pm eastern time over WTBQ1110AM radio NY/NJ and the world wide web at www.theexpatshow.com. Check out what time the show airs around your part of the planet!
MyPanamaLawyer is a blog for discussion of issues of interest to foreigners relocating to Panama.
No legal advice is provided. The opinions posted are solely those of the authors of the respective articles. Images and text are reproduced on a fair use, non-commercial basis pursuant to international conventions.
