PUERTO RICO Law and Practice Contributed by: Fernando J. Rovira-Rullán and Andrés I. Ferriol-Alonso, Ferraiuoli LLC
• Monetary damages – directors and officers found to have breached their fiduciary duties can be held personally liable for monetary damages. This may include compensating the corporation, sharehold - ers or other affected parties for any financial losses incurred as a result of the breach. • Injunctive relief – courts can issue injunctions to prevent the continuation of the wrongful conduct or to require specific actions to rectify the breach and protect the interests of the corporation or affected parties. • Rescission or restoration – in cases where the breach involved a transaction or action that harmed the corporation or its stakeholders, the court may order the rescission or undoing of the transaction or the restoration of the corporation to its prior condition. • Removal or disqualification – in extreme cases of breach of fiduciary duties, the court may even order the removal of directors or officers from their positions. 3.9 Other Claims/Enforcement Against Directors/Officers See 3.6 Legal Duties of Directors/Officers . Breaches of the limited liability company agreement by a mem - ber or manager may also be enforced against them. 3.10 Payments to Directors/Officers The Corporations Act does not impose any limitations on the compensation of directors. Unless otherwise specified in the certificate of incorporation or the by- laws, the board of directors has the authority to deter - mine the compensation to be paid to the officers and directors of the corporation. The Corporations Act does not specifically address this matter in connec - tion with LLCs.
Notwithstanding the foregoing, in situations where a majority shareholder has a conflict of interest with respect to a corporate matter, the Corporations Act imposes upon the controlling shareholder a duty of loyalty. In the case of LLCs, the Corporations Act establishes that members are bound by the same duty of loyalty to the LLC and to the other members as established for directors, officers and shareholders of a corporation. For LLCs, the Corporations Act allows for different responsibilities to be agreed upon in the limited liability company agreement. 4.2 Role of Shareholders One of the basics tenets of corporate law under the Corporations Act is that the business of a corpora - tion shall be managed by or under the direction of a board of directors. Thus, shareholders are generally not involved in the direct management of the corpo - ration. The principal exception to this occurs in the context of close corporations, in which the sharehold - ers may be primarily responsible for the operation and management of the entities, if such governance struc - ture is so provided for in the articles of incorporation. Nonetheless, shareholders have the right and the power to elect the board of directors, as well as the right to vote on and approve extraordinary transac - tions, such as: • any amendment to the certificate of incorporation or the by-laws; • a merger, consolidation or conversion; • the sale of all or a substantial amount of the assets of the corporation; or • a dissolution. Contrary to corporations, LLCs are regularly managed in a decentralised fashion by their members (similar to partnerships) and members actively participate in the operation and management of the LLC. The Corpora - tions Act provides that unless otherwise established in the limited liability company agreement, the LLC will be managed by the members owning more than 50% of the equity interests in the LLC. Notwithstanding the foregoing, the members may choose to implement a centralised management structure, similar to that of a corporation, including
4. Shareholders 4.1 Companies and Shareholders
Except for certain extraordinary matters (such as a merger or consolidation, conversions, the sale of all or substantially all of the assets, or dissolution) for which shareholder approval is required, generally sharehold - ers do not have corporate governance responsibilities in corporations.
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