PUERTO RICO Law and Practice Contributed by: Fernando J. Rovira-Rullán and Andrés I. Ferriol-Alonso, Ferraiuoli LLC
the election of a board of managers and the appoint - ment of officers. In such case, the members need to specify in the LLC’s limited liability company agree - ment the particular requirements regarding the man - agement structure, including what rights they wish to retain for themselves and wish to not delegate to the LLC’s board of managers and officers. 4.3 Shareholder Meetings The Corporations Act requires that corporations hold an annual meeting of shareholders, and allows the board of directors to convene special meetings of shareholders to discuss and take action on particular matters. The Corporations Act further provides that the notification period for an annual or special meet - ing must be no less than ten days and no more than 60 days prior to such meeting. If the notification is for a special meeting, the purpose of that meeting must also be disclosed in the notification. In addition, the by-laws of the corporation may estab - lish additional rules regarding who may convene spe - cial shareholder meetings. For example, they could provide that the shareholders holding a majority of the voting rights may convene a special meeting. In annual and special meetings, the shareholders have the right to vote (either in person or via proxy) on the matters brought before them. The Corporations Act also allows for participation via electronic methods. Contrary to corporations, LLCs are not statutorily required to hold annual or special member meet - ings; thus, the establishment of such meetings and the rules governing them are subject to the discretion of the members or as otherwise stated in the limited A shareholder may present a direct action against the corporation and its management alleging that they have suffered damages as an individual shareholder. Additionally, shareholders (and, in certain situations, creditors) may pursue derivative actions against man - agement. In a derivative action, a shareholder or group of shareholders pursues a claim on behalf of the cor - poration where the directors or officers of the corpora - tion fail to do so or violate one or more of their fiduci - liability company agreement. 4.4 Shareholder Claims
ary duties. This inaction on the part of management typically takes place where the directors or officers of the corporation are responsible for the damages alleged under the derivative action. It is important to note that under a derivative action, any relief or award granted by the courts shall be for the sole benefit of the corporation and not of the shareholder(s) who initiated the action. In the case of an LLC, the Corporations Act expressly states that only a current member of the LLC may file a deriva - tive suit. 4.5 Shareholders in Publicly Traded Companies See 1.3 Companies With Publicly Traded Shares . 5. Corporate Reporting and Disclosures 5.1 Financial Reporting Requirements There is no statutory requirement for private compa - nies regarding corporate governance disclosures to private parties, besides compilation of the company’s organisational documents (such as the certificate of incorporation and by-laws), the shareholders’ agree - ment (if adopted), the certificate of organisation and the limited liability company agreement, available to the shareholders and members of the corporation and/ or LLC. See also 6. Audit, Risk and Internal Controls . However, the Corporations Act requires that all cor - porations file an annual report to the Puerto Rico Department of State, detailing, among other things, the identity of at least two officers and/or directors of the corporation. The Corporations Act does not require such disclosure for LLCs with the Puerto Rico Department of State. Such annual reports are avail - able to the public through the Department of State’s website. However, no other requirement for public dis - closure on websites exists in Puerto Rico. 5.2 Corporate Governance Arrangement Disclosure See 5.1 Financial Reporting Requirements .
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