Directors’ Liability in the Management of a Panamanian Corporation

Mariano Oteiza Jr

By: Mariano Oteiza Díaz


The Board of Directors of a Panamanian corporation, pursuant to Article 51 of the General Corporations Law of Panama (Law 32 of 1927, hereinafter “the Law”), may exercise all the powers of the corporation, except those that the Law, the Charter of Incorporation or the Bylaws confer or reserve to the shareholders. Therefore, the Board of Directors is competent to manage and direct the business of the corporation in a general manner and its powers or authorities, among others, include the following:

  • To declare dividends of the corporation;
  • To authorize the issuance and repurchase of shares;
  • To adopt and amend the Bylaws;
  • To borrow money and issue debt instruments;
  • To appoint and remove the Officers of the corporation;
  • To approve all types of agreements and contracts;
  • To approve the sale and encumbrances on the assets of the corporation;
  • To delegate its authority and issue powers of attorney.

Due to the broad management powers and authorities that directors generally hold, under Panamanian law it is understood that the relationship between them (the directors) and the shareholders and the corporation is that which defines the relationship between an Agent and a Principal. Directors of a corporation are deemed to have been given a “mandate” to manage the business of the corporation and, therefore, are liable to execute their mandate under the duty of care standards held by Agents and may be personally liable for negligence in the exercise of that duty and mandate.


Article 444 of the Panamanian Code of Commerce establishes that directors shall not be personally liable for the obligations of the corporation, but shall be personally or jointly and severally liable, as the case may be, to the corporation and to third parties in the following events:

  1.  False capitalizations, i.e., of the effectiveness of the payments that appear to have been made by the shareholders;
  2.  For the lack of funds for the payment of dividends declared by the Board of Directors;
  3.  For the proper management of the corporation’s accounting;
  4.  In general, for the execution or poor performance of its mandate;
  5.  For the commission of acts that go against the provisions of the Charter of Incorporation, resolutions adopted by the shareholders, the bylaws of the corporation or the laws in general.

Nevertheless, the same Article adds that those directors who have protested in due time against the resolution of the majority or those who have not attended with just cause shall be exempted from liability. Liability may only be demanded by virtue of a resolution of the general shareholders’ meeting.


In addition to the provisions of the Code of Commerce, Article 64 of the Law additionally lists certain acts or events in which the directors who have given their consent and that thereby affect the capital stock of the corporation, may be jointly or severally liable to the creditors of the corporation for the resulting damages. Such acts are the following: (i) if any dividend or distribution of assets is declared or paid that reduces the value of the corporation’s assets to less than the amount of its liabilities, including in this the capital stock; (ii) if the amount of the capital stock is reduced; (iii) if any false statement is given or any false report is rendered on any material point.


As a final recommendation to our article, every director in the exercise of his/her functions must know and analyze in detail and prior to his/her appointment as such, which are his/her functions, powers, obligations and liabilities in the company’s management, since they may vary from company to company based on the provisions of its Charter of Incorporation, bylaws or resolutions of the Shareholders’ Assembly.

For assistance regarding Panamanian Corporations, contact us at

Mariano Oteiza Jr

Icaza, González-Ruiz & Alemán names Mariano Oteiza Díaz its newest partner

Mariano Oteiza Díaz – Icaza, González-Ruiz & Alemán’s newest partner


Icaza, González-Ruiz & Alemán is pleased to announce the appointment of Mariano Oteiza Díaz as our new partner.


Mariano specializes in corporate and administrative law and has more than ten years of experience in the areas of Asset Protection and Taxation. He obtained his bachelor’s degree in Law and Political Science from Universidad Santa María La Antigua, Summa Cum Laude. In addition, he holds a Master of Corporate Law from the University of Pennsylvania and a Diploma in Taxation from the Certified Public Accountant College.


The promotion of our new partner reflects our commitment to the development and advancement of attorneys who have played a fundamental role in our growth and are dedicated to promoting and protecting the interests of our clients and the institutional values of the firm.


Congratulations, Mariano! We wish you continued success in your well-deserved new role.

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