PUERTO RICO Law and Practice Contributed by: Fernando J Rovira-Rullán and Andrés I Ferriol-Alonso, Ferraiuoli LLC
required, and ultimately how the company is managed. • The Corporations Act does not impose on the members of an LLC the obligation to adopt a limited liability company agreement. How - ever, unlike Delaware law, which includes oral, written or implied forms of a limited liability company agreement, the Corporations Act defines the limited liability company agree - ment as a written agreement. If no limited liability company agreement is adopted, the LLC will be subject to the default provisions contained in the Corporations Act. For the purpose of this publication, the authors will treat LLCs as if a limited liability company agreement had been adopted. 1.3 Corporate Governance Requirements for Companies With Publicly Traded Shares Puerto Rican publicly traded companies regis - tered with the Securities and Exchange Com - mission are subject to regulations promulgated under the Securities Act of 1933 and the Secu - rities Exchange Act of 1934, and to such other rules and corporate governance requirements imposed by the exchanges in which their secu - rities are traded. 2. Corporate Governance Context 2.1 Hot Topics in Corporate Governance A recent development in corporate governance is the amendment of the Corporations Act in December 2015 to allow for the organisation, merger and/or conversion of public benefit corporations ( “Benefit Corporations” ) in Puerto Rico. Benefit Corporations that are organised under the Corporations Act are required to file annual reports and social benefit reports, setting
forth the public benefit provided by the corpora - tion. One of the advantages of organising a Benefit Corporation is that its directors, in making their determinations, are allowed to consider factors other than the best interests of its sharehold- ers (for example, they are allowed to take into consideration, among other things, the general public benefit pursued, the best interests of its employees and the community at large). In addi - tion, directors of Benefit Corporations shall not be liable for any damages caused due to deci - sions made in good faith and in pursuit of the general public benefit set forth in the certificate of incorporation. Additionally, in 2017, the Supreme Court of Puerto Rico decided that, in order to require that a corporation liquidate any assets still owned by it after the three-year period granted by the Corporations Act following dissolution has elapsed, the interested party must request that the court appoint one or more of the directors of the corporation to be trustees, or appoint one or more persons to be receivers, of and for the corporation, to take charge of the corporation’s property, as provided under Article 9.09 of the Corporations Act. A major challenge in Puerto Rico is that the majority of private companies in the country are closely held family businesses that generally do not have the sophistication of larger businesses with regard to matters of corporate governance. Thus, given the nature of these companies, cor - porate governance formalities are not always strictly followed or enforced, and this may cause difficulties or problems when attempting to execute certain types of transactions, such as obtaining commercial financing or a merger and acquisition of an ongoing concern.
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