PUERTO RICO Law and Practice Contributed by: Fernando J Rovira-Rullán and Andrés I Ferriol-Alonso, Ferraiuoli LLC
Another significant challenge for most closely held family businesses is the adoption and suc - cessful implementation of an orderly plan of suc - cession that will smoothly transfer the manage - ment of the business from one generation to the next. Often, these companies are founded and managed by one individual who may not take the time to nurture or identify another person or persons to succeed them after their retirement or death. The lack of a generational transition plan has resulted in the termination of many success - ful businesses in Puerto Rico. Due to their flexibility regarding governance, LLCs offer family and small businesses the abil - ity to reduce recurring governance and other formalities. As a result of the COVID-19 pandemic, and despite already being permitted under the Cor - porations Act, there has been an increase in questions and/or requests to update by-laws, limited liability company agreements and organi - sational documents to allow for remote meet - ings of shareholders, members, directors and managers. 2.2 ESG Considerations In addition to existing regulations concerning the use of natural resources that extend from federal to local law (for example, regarding air and water pollution) which vary depending on the industry sector, Act 33-2019 adopted a new public policy to: • address climate change; • reduce and mitigate the effects of greenhouse gas emissions; • address deforestation on the island; • promote a sustainable economy; and • incentivise renewable energy sources, as part of the government’s energy diversifica -
tion and transformation policies under Act 82-2010 (Renewable Energy and Diversifica - tion) and Act 17-2019 (Energy Public Policy Act), among others. Likewise, as previously mentioned in 2.1 Hot Topics in Corporate Governance , in December 2015, the Puerto Rican government enacted Act 233-2015, which amended the Corporations Act to allow the creation of public benefit corpora - tions. Public benefit corporations are required, among other things, to file annual reports and social benefit reports regarding: • environmental matters (product cycle man - agement, reduction of waste and residues, use of clean technologies, reduction of a negative environmental footprint, and respon - sible use of natural resources); • corporate operations (information transpar - ency, economic impact in the communities where the corporation operates, and health and safety initiatives); and • human capital (policies and practices against discrimination, elimination of work violence, and development of human capital). Also, the reports must set out the public benefits that the entity brings to the community in which it operates. In addition, a significant number of compa - nies practise various levels of corporate social responsibility. Generally, Puerto Rican compa - nies and business leaders are actively involved in an array of non-profit entities that provide a wide variety of services and benefits to local communities.
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