COMPOSITION OF THE BOARD IN A CORPORATION
The corporate governance of a sociedad anónima is entrusted to a board composed of at least three members. The bylaws may increase this number to a maximum of twelve. Directors are appointed by the ordinary general shareholders’ meeting for a fixed term, with the possibility of reelection and the right of the meeting to remove them at any time. Any method of appointment outside the general meeting is invalid.
ELECTION OF DIRECTORS ACCORDING TO SHARE CLASSES
The bylaws must define how principal and alternate directors are appointed. If different classes of shares exist, the bylaws may grant each class the right to elect one or more directors, including procedures for their election and removal.
WHO CAN BE A DIRECTOR OF A CORPORATION?
To serve as a director, an individual must have legal capacity to engage in commerce. The following persons are disqualified or restricted:
- Individuals with conflicts of interest, pending litigation, or outstanding debts with the company
- Relatives within the fourth degree of consanguinity or second degree of affinity serving on the same board
- Internal auditors or equivalent oversight officers (e.g., síndicos)
- Public officials with jurisdiction related to the company’s business purpose, for two years after leaving office
- Persons disqualified from commerce or convicted of crimes related to corporate formation, operation, liquidation, or general crimes, for five years following sentence completion
Example: An individual acting as the company’s síndico cannot simultaneously serve on the board. If a potential director is the brother-in-law of an already appointed member, both cannot serve on the same board.
DIRECTOR’S BOND AND OBLIGATIONS
Directorship is a personal and non-delegable role. Voting by correspondence is not permitted. Each director has one vote, and any agreement altering this rule is null and void.
LEGAL REPRESENTATION OF A CORPORATION
The board may elect its chairperson by absolute majority, unless the bylaws require a higher threshold. Legal representation of the corporation resides in the chairperson. The bylaws may provide for joint representation with other directors or with managers, provided this complies with general rules and statutory limits.
MANDATORY BYLAW PROVISIONS FOR BOARDS
- The bylaws must regulate, at minimum:
- The number of principal and alternate directors
- The term of office (not exceeding three years, subject to reelection and revocation by the general meeting)
- Frequency of meetings and method of convocation
- Quorum and voting requirements for resolutions
MINORITY SHAREHOLDERS’ RIGHTS IN THE BOARD
Minority shareholders holding at least 20% of voting capital have the right to appoint one-third of the board (or the nearest lower fraction).
Example: If the board has six members, a group with 20% may designate two directors. If the board has five members, they may designate one (the nearest lower fraction to one-third).
RESIGNATION AND REMOVAL OF DIRECTORS
Directors remain in office until their successors take over.
Termination is immediate if the general meeting decides to bring legal action against a director. If the judicial authority later dismisses the case, the director is reinstated.
Resignations must be submitted to the board, which may accept them if management is not affected. If not accepted, the resignation is referred to the next shareholders’ meeting; meanwhile, the director remains in office with full responsibilities.
REMUNERATION OF CORPORATE DIRECTORS
Directors may be compensated for their services unless otherwise prohibited by the bylaws. Compensation is set by the shareholders’ meeting, subject to a maximum of 20% of the company’s net earnings for the fiscal year, jointly with the síndicos. If profits are insufficient or nonexistent, explicit shareholder approval is required for any remuneration.
In summary, a well-structured board — with clear rules on composition, election, disqualifications, bonding, representation, and compensation — strengthens corporate governance, minimizes conflicts, and ensures operational continuity. Statutory foresight and protection of minority shareholder rights are essential pillars for stability and transparency.
Our law firm provides specialized services in corporate governance, bylaw drafting, compliance before the Registry of Commerce, and defense in director liability cases. If you are dealing with a related matter, contact us for a professional legal assessment.
Frequently Asked Questions (FAQs)
What is the minimum number of directors a corporation must have?
At least three. The bylaws may allow up to twelve.
Who appoints and can remove directors?
The general shareholders’ meeting appoints directors for a fixed term and may remove them at any time.
Can directors vote by correspondence?
No. The role is personal and non-delegable. Each director has one vote.
What rights do minority shareholders have?
Shareholders with at least 20% of voting capital may designate one-third of the board (or the nearest lower fraction).
When is the director’s bond released?
One year after the approval of financial statements for the last fiscal year in which the director served.
The content of this article does not reflect the technical opinion of Rigoberto Paredes & Associates and should not be considered a substitute for legal advice. The information presented herein corresponds to the date of publication and may be outdated at the time of reading. Rigoberto Paredes & Associates assumes no responsibility for keeping the information in this article up to date, as legal regulations may change over time.
