PUERTO RICO Law and Practice Contributed by: Fernando J Rovira-Rullán and Andrés I Ferriol-Alonso, Ferraiuoli LLC
• a dissolution. Contrary to corporations, LLCs are regularly managed in a decentralised fashion by their members (similar to partnerships) and mem - bers actively participate in the operation and management of the LLC. The Corporations 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 manage - ment structure, similar to that of a corporation, including the election of a board of managers and the appointment of officers. In such case, the members need to specify in the LLC’s lim - ited liability company agreement the particular requirements regarding the management struc - ture, including what rights they wish to retain for themselves and wish to not delegate to the LLC’s board of managers and officers. 5.3 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 meeting 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 establish additional rules regarding who may convene special shareholder meetings. For example, they could provide that the sharehold - ers holding a majority of the voting rights may
convene a special meeting. In annual and spe - cial 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 liability company agreement. 5.4 Shareholder Claims 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 situ - ations, creditors) may pursue derivative actions against management. In a derivative action, a shareholder or group of shareholders pursues a claim on behalf of the corporation where the directors or officers of the corporation fail to do so or violate one or more of their fiduciary duties. This inaction on the part of management typi - cally takes place where the directors or officers of the corporation are responsible for the dam - ages 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 derivative suit.
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