2023 Laws of Puerto Rico › TITLE FOURTEEN - Private Corporations (§§ 1 — 4084) › Subtitle 5 - General Corporations Act (2009) › Chapter 224 - Directors and Officers (§§ 3561 — 3568) › § 3568 - [Compensation of] officers, directors, employees, and agents; insurance

(a) A corporation may compensate any person who is, has been a party, or is under threat of becoming a party to any imminent, pending or resolved civil, criminal, administrative or investigative action, suit or proceeding (except an action initiated by the corporation or initiated to protect the interests of the corporation), because the person has been or is a director, officer, employee or agent of the corporation, or had been or is acting by request of the corporation as director, officer, employee, or agent of another corporation, partnership, joint venture, trust or any other enterprise. The compensation may include the expenses incurred in a reasonable manner, including attorney fees, adjudication or judgments, fines and amounts paid upon settling such action, suit or proceeding, if the person acted in good faith and in a manner which the person deemed to be reasonable and consistent with the best interests of the corporation and not opposed thereto, and that with respect to any criminal action or proceeding, the person did not have reasonable cause to believe that his conduct was unlawful. The termination of any legal action, suit or proceeding by judgment, order, settlement or conviction or by a plea of nolo contendere, or its equivalent, shall not in itself create the presumption that the person did not act in good faith nor in a manner which he reasonably believed to be consistent with the best interests of the corporation or not opposed thereto and that, with respect to any criminal action or proceeding, the person did not have reasonable cause to believe that his conduct was unlawful.
(b) A corporation may compensate any person who is, has been a party, or is under threat of becoming a party to any imminent, pending or resolved action or suit initiated by the corporation or initiated to protect the interests of the corporation to procure a judgment in its favor because the person is or has been a director, officer, employee or agent of the corporation, or is or has been acting by request of the corporation as director, officer, employee or agent of another corporation, partnership, joint venture, trust or any other enterprise. The compensation may include the expenses incurred in a reasonable manner, including attorney fees, with respect to the defense or settlement of such action or suit, if the person acted in good faith and in a manner he/she reasonably deemed to be consistent with the best interests of the corporation and not opposed thereto.
Notwithstanding the foregoing, no compensation shall be made with respect to a claim, matter or controversy in which it has been determined that such person is liable to the corporation, except that through a motion to that effect, the court presiding in such action or suit determines that in spite of the adjudication of liability against, and in light of all of the circumstances of the case, such person has the fair and reasonable right to be compensated for those expenses which the court deems proper and only insofar as said court so deems.
(c) To the extent that a director, officer, employee or agent of the corporation has prevailed on the merits, or otherwise, in the defense of the action, suit or proceeding referred to in subsections (a) and (b) of this section, or in the defense of any claim, issue or controversy relating thereto, he/she shall be compensated for reasonable expenses incurred (including attorney fees) by reason of such action, suit or proceeding.
(d) Any compensation pursuant to subsections (a) and (b) of this section (except that ordered by the court) shall be made by the corporation only as authorized in the specific case, after determining that the compensation to the director, officer, employee or agent is proper under the circumstances because he/she has met the applicable norms of conduct established in subsections (a) and (b) of this section. Such determination shall be made:
(1) By the board of directors, through a majority vote of the directors who were not parties to such action, suit or proceeding, even if such directors constitute less than the quorum; or
(2) by a committee of directors designated through a majority vote of the directors who were not parties to such action, suit or proceeding, even if they constitute less than the quorum; or
(3) if there are no such directors or if such directors so determine, by independent legal counsels through a written opinion to that effect, or
(4) by the stockholders.
(e) Prior to final resolution of such action, suit or proceeding, the corporation may pay the expenses incurred by a director or officer in the defense of a civil or criminal action, suit or proceeding, in advance, after obtaining a payment commitment by or on behalf of such director or officer that he/she will reimburse such amount if it is finally determined that he/she is not entitled to such compensation by the corporation, as authorized in this section. The expenses incurred by other directors, officers and other employees or agents may be paid in this manner, pursuant to the terms and conditions which the board of directors deems convenient.
(f) The compensation and advance of expenses provided in this section shall not be deemed to exclude any other right which those seeking the compensation or advance may have, pursuant to any bylaws, agreement, vote of uninterested stockholders or directors, or otherwise, with regard to their actions, both in their official capacity or otherwise, while discharging the functions of said office.
(g) Every corporation shall be empowered to purchase and maintain insurance in the name of any person who is or has been a director, officer, employee or agent of the corporation, or who is or has been acting as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or any other enterprise by request of the corporation, against any liability claimable against such person, or which he/she has incurred in such capacity, or which arises out of his/her status as such, whether or not the corporation has the power to compensate such person against such liability pursuant to this section.
(h) For purposes of this section, it shall be deemed that the term “the corporation” includes in addition to the resulting corporations, any constituent corporation of a consolidation or merger that was absorbed in said consolidation or merger, which, if it had continued its independent juridical personality, would have had the power and the authority to compensate its directors, officers, and employees or agents. Therefore, every person who is or has been a director, officer, employee or agent of any constituent corporation of a consolidation or merger, or is or has been acting as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or any other enterprise, by request of said corporation, shall be, pursuant to this section, in identical position with respect to the resulting or originating corporation as such person would have been in relation to the original corporation had the independent juridical personality thereof continued.
(i) For purposes of this section, the term “other enterprises” shall include employee-benefit plans. The term “fines” shall include taxes imposed on any person with regard to any benefit plan or for employees. The term “acting by request of the corporation” shall include any service as director, officer, employee or agent of the corporation which imposes duties on such director, officer, employee or agent, or implies services rendered by them in relation with an employee pension plan, its participants or beneficiaries. In addition, it shall be deemed that every person who has acted in good faith and in a manner which appeared to be consistent with the interests of the participants and beneficiaries of an employee pension plan has, acts in a manner which “is not opposed to the best interests of the corporation”, as used in this section.
(j) The compensation and payment advance, as provided by the present section, must continue for those persons who ceased holding office as director, officer, employee or agent and must continue for the benefit of heirs, executers or administrators of such person, except otherwise provided when the compensation or payment advance is authorized or ratified.
(k) The Court of First Instance may see and rule on any action with respect to payment advances and compensation, as provided by this section, or on the regulations, agreements, stockholder or uninterested directors vote or in any other manner. The court may summarily determine the obligation of the corporation to pay the expense advances, including attorney fees.
History —Dec. 16, 2009, No. 164, § 4.08.