Business partners’ agreements in Panama: what to settle before investing

Put business expectations in writing

Two people may want to start the same business but have different expectations about work, decisions and profits. Discuss those differences before transferring money, signing a lease or hiring staff.

At Quirós & Quirós, we review the project and available documents to prepare or review agreements within the agreed engagement. If a company already exists, the review includes its articles, amendments and previous agreements.

What each person contributes

List the money, assets, work and other resources envisaged. Identify who contributes them, when, on what conditions and with what supporting documents. Distinguish contributions from loans and expenses that someone expects to recover.

A percentage for each participant does not by itself resolve a delayed contribution or a need for additional funding. These scenarios should be discussed and documented in accordance with the chosen legal structure.

Who manages the business and how decisions are made

Identify who will run day-to-day operations and the authority needed to enter into contracts. Distinguish ordinary decisions from matters such as borrowing, bringing in participants, selling important assets or changing the activity.

Define how accounts are presented, what information each participant receives and how decisions are recorded. Holding shares, managing the company and working for the business are different roles that should be clear.

Remuneration, expenses and possible distributions

Payment for work, expense reimbursement, repayment of a loan and a distribution to participants are different concepts. Record what is proposed in each case and its supporting documents.

Review checks consistency with corporate documents and applicable rules. Fixed payments or distributions should not be promised without examining their conditions and the business’s obligations.

If someone wants to leave or stops participating

Someone may wish to leave even when the business is performing well. Discuss notice, information needed to value the interest and how a possible transfer would be assessed.

Review loans, personal guarantees, contracts and other obligations that may continue. Selling an interest should not be treated as automatically releasing every commitment.

Death, incapacity or prolonged decision-making deadlock also require attention. Solutions must be compatible with the company, the rights of those affected and Panamanian law.

The agreement and articles must be consistent

Panama’s Civil Code allows agreed terms within the limits of law, morality and public policy. Copying a foreign template or assuming that every clause will be enforceable is therefore insufficient.

A private agreement between participants does not automatically replace the articles or the acts required of corporate bodies. The parties bound and required formalities must be reviewed; the agreement is not presumed to bind third parties who did not enter into it.

Transfer restrictions, dispute resolution arrangements and voting rules require specific analysis. For a Panamanian corporation, this includes Law 32 of 1927 and its corporate documents.

Prepare the consultation and identify the client

Gather corporate documents, previous agreements, the financial proposal and a list of agreed and outstanding points. If there is no company yet, describe the activity, participants and planned timetable.

Before accepting the work, the firm identifies whom it advises and reviews possible conflicts of interest. The scope, documents to be prepared and review rounds are agreed in the proposal.