PUERTO RICO Law and Practice Contributed by: Fernando J. Rovira-Rullán and Andrés I. Ferriol-Alonso, Ferraiuoli LLC
committees and provides guidance to other direc - tors. • The secretary of the board of directors of a Puerto Rican corporation must be present at all meetings of the board of directors and take minutes of the discussions and decisions taken at any such meet - ings. (May be different than a the secretary who is an officer.) • Committee chairs – directors may serve as chairs of various board committees, such as the Audit Committee, Compensation Committee and Nomi - nating Committee. Committee chairs are respon - sible for leading committee meetings, overseeing specific areas of corporate governance and making recommendations to the full board. 3.3 Board Composition The only requirement is that directors be natural per - sons of legal age. There are no composition require - ments, such as regarding independent directors. 3.4 Appointment and Removal of Directors/ Officers The members of the board of directors of a corpo - ration are elected annually by a majority vote of the shareholders present at the annual meeting of share - holders, in person or via proxy, who have the right to vote at such meeting. It is important to note that the certificate of incorporation may provide for the crea - tion of a staggered board with two or three groups of directors, who may serve for a period of one to three years. In a staggered board, only one group of directors will be elected at each annual meeting of shareholders. Through its articles of incorporation and/or it by-laws, a Puerto Rico Corporation may establish other restric - tions or requirements for directors. In a non-staggered board of directors, any one direc - tor or the whole board of directors may be removed with or without cause by the holders of a majority of the shares entitled to vote for the election of directors. In a staggered board of directors, shareholders may only remove a director for just cause, unless other - wise provided in the certificate of incorporation. Fur - thermore, if the certificate of incorporation authorises
cumulative voting, no director may be removed if the cumulative votes against their removal are sufficient to elect such director as a member of the board of directors. In the event of a vacancy as a result of the removal, resignation or death of a director, the remaining mem - bers of the board of directors may designate a director without seeking the approval of the shareholders. A director designated to the board of directors in such a fashion shall serve for the remainder of the former director’s term. Unless otherwise specified in the certificate of incor - poration or by-laws, the officers of a corporation are appointed by the board of directors without the need to seek the consent of the shareholders. The board of directors has the exclusive power to appoint and remove corporate officers as they deem to be in the best interests of the corporation. The members of an LLC may choose to appoint a manager or a group of managers who will have the rights and responsibilities provided in the limited lia - bility company agreement. The authors note that the Corporations Act does not directly address the remov - al of the manager of an LLC; however, a manager may be removed by the members holding a majority inter - est in the LLC. 3.5 Independence of Directors Although there are no legal requirements for Puerto Rico corporations to have an independent director(s), under the Corporations Act, independent directors are considered objective and free from conflicts of interest that could compromise their judgement, and there are rules and requirements related to the independence of directors and the management of potential conflicts of interest. These rules aim to ensure that directors act in the best interest of the corporation and its share - holders. Among the most salient key considerations are the duty of loyalty and the duty of care, which are discussed in further detail in 3.6 Legal Duties of Directors/Officers . 3.6 Legal Duties of Directors/Officers The directors and officers of a corporation are bound by three principal legal obligations:
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