PUERTO RICO Law and Practice Contributed by: Fernando J. Rovira-Rullán and Andrés I. Ferriol-Alonso, Ferraiuoli LLC
The governance structure of a Puerto Rican LLC is generally set forth in the limited liability company agreement. The LLC can be member-managed, man - ager-managed or can even adopt a more traditional corporate board structure. Where the limited liability company agreement is silent, the holders of a majority of the company’s membership interest shall control, but any member can bind the company before a third party. 2.3 Decision-Making Processes The decision-making process for a board of direc - tors and/or other governing bodies typically occurs through one of two methods: • meetings; or • written consent. The Corporations Act does not impose a statutory requirement to hold a minimum number of board of directors’ meetings, nor does it provide or establish specific guidelines as to how to conduct the order of business in a board meeting. The Corporations Act simply requires, unless otherwise stated in the certifi - cate of incorporation or the by-laws, that the board of directors’ meeting be held in person or by electronic means of communication (such as telephone or video conferences) provided that all members of the board of directors assisting such meeting can listen to each other simultaneously. Furthermore, unless prohibited by the corporation’s by-laws, any action required or permitted to be taken at any meeting of the board of directors may be taken without a meeting, if all members of the board of direc - tors consent thereto in writing, and such consents are filed with the minutes of the proceedings of the board of directors. Thus, any rules governing the meetings of the board of directors, such as minimum notification periods, frequency of meetings and quorum, are most commonly specified in the corporation’s by-laws. The Corporations Act does not govern the meetings of the members of an LLC, nor does it provide or establish rules governing the structure or process for the meetings of the members or any governing body. Given that the Corporations Act does not require that a meeting of the management body of an LLC be
held, such requirements are generally established in the company’s limited liability company agreement.
3. Directors and Officers 3.1 Board Structure
A typical board structure of a Puerto Rican corpora - tion consists of one or more natural persons who are elected to act as directors of the corporation by the shareholders. In a standard board structure, all direc - tors are elected for a one-year term, and shareholders vote for the entire board at the annual meeting. However, a Puerto Rican corporation may choose to implement a staggered board structure, where the board is divided into multiple classes, with each class serving a different term length. For example, the board may be divided into three classes, where one class is elected for a one-year term, another for a two-year term, and the third for a three-year term. Each year, shareholders vote to elect directors for the class that is up for election, and this process is repeated over the years. The purpose of a staggered board structure is to provide continuity and stability to the corporation’s leadership. In the case of an LLC, if the limited liability company agreement provides for a board structure, one salient difference is that a legal entity (as opposed to a natural person) may be a member of the board of an LLC. 3.2 Board Members In a Puerto Rican corporation, there are no set roles for directors; nevertheless, if the corporation is so structured through its by-laws and/or certificate of incorporation, directors may hold various offices with particular roles, such as the following. • The chairman of the board is usually responsible for leading board meetings and setting the agenda, and often acts as a liaison between the board and senior management. • The vice-chairman is a senior board member who supports the chairman of the board, and may step in to fulfil their duties in their absence. The vice- chairman often plays a leadership role in board
580 CHAMBERS.COM
Powered by FlippingBook