Establishing a foreign foundation company can be a complex endeavor that requires legal foresight. Nevertheless, it has become an increasingly popular choice for DAOs looking to minimize tax burden while taking advantage of its flexible framework in facilitating governance protocols off-chain.
Decentralization is no easy feat, and it's not something that can happen with the snap of a finger. Network founders should be wary of any shortcuts they may take in their journey to decentralized - establishing a foundation that doesn't align with DAO goals won't get them closer to truly decentralized autonomy.
In our recent blog exploration, we highlighted several DAO wrapping options with varying complexities - from the simplicity of a Swiss Association or Foundation to the more exotic Cayman Islands Foundation and Marshall Island LLC. Let's take it one step further: how does the legal framework surrounding Panama Private Interest Foundations (PPIFs) compare?
General information
Established by the Panamanian government, the Panama Private Interest Foundation (PPIF) is an offshore asset protection solution designed to provide financial confidentiality and stability. Its structure reflects inspiration from Liechtenstein's 'Stiftung,' as well as private foundations in Switzerland and Luxembourg — providing key differences from traditional offshore companies, such as non-participation in commercial activities.
A Panama Foundation offers a unique layer of asset protection, as it is distinct from other legal entities under Anglo-Saxon law in that no individuals or entities own the Foundation. Every person connected to the Private Interest Foundation has separate holdings with assets not associated with one individual.
Key roles in Panama Private Interest Foundation
Founder of the Foundation gets to appoint and remove members of a Foundation Council and make an endowment.
Foundation Council is a core component essential to achieving the goals of any foundation. A minimum of three members are required for it (unless the council is a juridical person), and each will be charged with carrying out the aims outlined in its charter or regulations. They must uphold both secrecy and confidentiality at all times. A founder can participate in the Foundation Council.
Beneficiaries of a Foundation: Foundation Council hands over to beneficiaries of foundation assets or resources settled in their favor in a Foundation Charter or its regulations.
To ensure the highest level of trust and security, a Protector or other supervisory body may be appointed. Primarily consisting of either natural persons or legal entities, the roles assigned to supervisors shall be written within the Foundation Charter and its Regulations.
Additional facts about a Panama Private Interest Foundation
The Foundation shall not be profit-oriented; it should be funded by an endowment of at least $10,000 which can be denominated in any official currency and must only serve the purpose outlined as the Foundation's objectives.
In Panama, you can benefit from total tax exemption on all income not originating in the country. Unfortunately, since it is not a party to the Madrid Agreement or Madrid Protocol, international Intellectual Property registration cannot be sought there.
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