Puerto Rico Corporate Bylaws
Puerto Rico corporate bylaws are the set of rules that establish how your corporation will operate. Corporate bylaws not only define the organizational structure of your company, but also determine how stock will be issued, where and when shareholder and board meetings will take place, and how the bylaws themselves will be amended. Bylaws are flexible in that they can include any policy (within the law) that is not already covered under Puerto Rico’s laws.
We’re not kidding when we say that corporate bylaws are essential. They can, however, be a bit dense, which is why at Northwest, we offer a free, attorney-drafted template you can use to create bylaws that suit the needs of your corporation.
Why do I need corporate bylaws?
Corporate bylaws help you to prepare for the myriad situations your corporation is likely to face, and to protect your corporation should it get sued or enter into bankruptcy. Unlike your Puerto Rico Certificate of Incorporation, your corporate bylaws do not have to be filed with Puerto Rico’s Department of State.
Even though bylaws don’t need to be filed with the state, that doesn’t mean you should skip them. Here are two reasons why your bylaws are worth taking the time to get right:
1. Corporate bylaws establish the rules and roles within your corporation.
Corporate bylaws help to establish clear rules for how your corporation will address issues like where you will hold board and shareholder meetings, record-keeping procedures, issuance of stock, and even how you will vote on amendments to the bylaws. Plus, if there is ever an internal dispute, your bylaws will be used to settle the disagreement.
2. Corporate bylaws prove that your business is a legitimate corporation.
Landlords, banks, and potential investors will want to see your bylaws before doing business with you. A corporation that hasn’t taken the time to create bylaws isn’t a company many people will trust. Plus, if your corporation ever gets sued, your bylaws will help bolster your claim to limited liability, which is crucial for protecting your personal assets.
Does Puerto Rico require corporate bylaws?
No. P.R. Laws tit. 14, § 3508 notes that bylaws MAY be adopted by the incorporators, initial directors of a corporation, or by the board if no payment for shares has yet been received. The statutes, however, don’t specifically require the adoption of bylaws. We wouldn’t recommend skipping over creating bylaws though, because they not only provide structure for your corporation, but they can also help you maintain limited liability by showing that your corporation is a distinct legal entity with clear rules and protocols.
What is included in Puerto Rico Corporate Bylaws?
Corporate bylaws cover basic policies and procedures for issues such as company finances and management. Bylaws should cover a range of topics, including:
- Directors and officers
- Stock
- Meetings
- Finances
- Record keeping
- Amendments and emergencies
Who prepares the bylaws?
Corporate bylaws are adopted by directors or incorporators at your initial organization meeting. While it’s a good idea to consult with a lawyer before finalizing your bylaws, you can use our free Puerto Rico Corporate Bylaws template to help get you started.
Are corporate bylaws legally binding?
Yes. Your bylaws can be used in a court of law to reinforce your limited liability status by showing that your corporation adheres to standard protocols. On the flip side, if your corporation doesn’t adhere to its bylaws, your corporation could be hit with lawsuits, fines, and even dissolution.
FAQs
Are bylaws filed with the territory of Puerto Rico?
No. Because your bylaws are internal, there is no need to file them with the government of Puerto Rico. However, you’ll want to keep your bylaws easily accessible with the rest of your business records.
Do bylaws need to be signed?
Bylaws do not need to be signed, but the act of signing your bylaws demonstrates that everyone is on the same page about how your corporation will function, so it’s a good idea.
How do I amend my bylaws in Puerto Rico?
P.R. Laws tit. 14, § 3508 states that “the power to adopt, amend, or repeal the bylaws may be conferred upon the board of directors.” The law also states that shareholders have the power to amend and repeal bylaws, even if directors also have that power. In general, the procedures for amending bylaws are articulated in the bylaws themselves. Any amendments that are agreed upon won’t need to filed with the state.