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Comparison of Panama IPO Market to Us Market
INTRODUCTION
This paper has the purpose of presenting the reader with a brief overview of an Initial Public Offering (IPO) performed in the republic of Panama.
The Initial Public Offering process is complex and has significant consequences for a publicly held company.
We will focus in describing the processes of registration and issuance of IPO’s and all the parties involved in the process.
Unfortunately, the securities market in Panama is in a developing phase, evolving towards a more dinamic state that reflects the economic reality, globally as well as domestically.
1. WHAT IS A INITIAL PUBLIC OFFERING OF SECURITIES
The Initial Public Offering is a process whereby an issuer registers its securities at the National Securities of Commission (CNV) and offers them to the public.
An offer or sale made to persons domiciled in the Republic of Panama will be considered to have been made in the Republic of Panama, regardless of whether it was made from the Republic of Panama or from abroad, unless the CNV determines the opposite.
An offer or sale made to persons domiciled outside the Republic of Panama will not be considered to have been an offer in the Republic of Panama even if it was made from the Republic of Panama.
An investment banker recommends and advises a company during the public offering, helps to integrate a working team, must undertake the carrying out of the due diligence, assists in the technical preparation of the registration petition and the prospectus, (generally) signs a subscription contract with the company and maintains a relation with the issuer after the public offering.
2. CURRENT LEGISLATION
The Executive Branch enacted Law-Decree No.1 of 8 July 1999, which creates the NATIONAL SECURITIES COMMISSION (CNV) and regulates securities trading in the Republic of Panama; it’s been modified by Laws 42 of 2000, 29 of 2001 and 11 of 2002.
The NATIONAL COMMISSION OF SECURITIES was created as an autonomous entity of the State with legal capacity and its own possessions.
In order to guarantee its autonomy, the CNV:
· Shall have its own funds separated and independent from those of the Central Government and shall have the right to manage them.
· Shall approve its income and expenses budget, which shall later be included within the general budget of the State. As long as the CNV budget includes funds provided by the State, its budget will be prepared by the Ministry of Economy and Finance as part of the State’s budget.
· Shall select, appoint and dismiss its personnel and set their remuneration, in conformity with the provisions of its internal set of regulations.
3. CONVENIENCES OF MAKING A PUBLIC OFFERING
Advantages: Obtaining of cash, liquidity for employees and investors alike, access to markets for future financing, tax advantages.
Disadvantages: Reduction of the flexibility in corporate affairs, compliance with reporting requirements of the CNV, restrictions in advertising matters, exposure to class action suits, initial and administrative expenses.
4. STEPS [next page]