P.R. Laws tit. 7, § 1362e
(a) Wholly owned (100%) subsidiaries. — Cooperatives may perform any of the activities that they are directly allowed, or through subsidiaries that are one hundred percent (100%) owned and controlled by the cooperative. Said subsidiaries may organize under any of the statutory provisions that allow the organization of juridical entities under the laws of Puerto Rico, including this chapter, Act No. 50 of August 4, 1994, known as the “General Cooperative Associations Act of Puerto Rico”, Act No. 144 of August 10, 1995, known as the “General Corporations Act of 1995”, §§ 941 et seq. of Title 10, and the provisions of the Civil Code of Puerto Rico of 1930, as amended, regarding partnerships and trusts, and under the provisions of successor acts of the abovementioned statutes. Regardless of the provisions of Act No. 50 of August 4, 1994, for the purpose of the creation of subsidiary entities, the appearance of the cooperative or its authorized representative shall be sufficient, without requiring multiple incorporators.
An adequate cooperative may establish the subsidiaries subject to having notified the Corporation of the establishment thereof. The establishment of a wholly owned (100%) subsidiary, shall be deemed as approved if the Corporation does not present an objection within thirty (30) calendar days following the date the notice of the cooperative is received. The objection by the Corporation must make express indication of the specific grounds thereof, in which case the procedure for the establishing of the subsidiary shall be detained until the objection is withdrawn. The cooperatives that are not adequate may establish subsidiaries subject to the prior approval of the Corporation. Every notice required under this section shall be submitted in writing and signed by an official authorized to conduct such transactions and shall contain such information that the Corporation requires by regulations.
The operations of the subsidiaries shall be subject to external auditing by a certified public accountant. With regard to the subsidiary, the Corporation shall have all the powers it possesses pursuant to this chapter, §§ 1334 et seq. of this title, and any special laws that are applicable to it.
(b) Investment in second-degree financing enterprises. — Two (2) or more cooperatives may establish, organize and invest in institutions or entities engaged in offering financial or administrative services to cooperative entities or other persons. Said entities may be organized under any of the statutory provisions that permit the organization of statutory entities pursuant to the laws of Puerto Rico, including this chapter, Act No. 50 of August 4, 1994, known as the “General Cooperative Associations Act of Puerto Rico”, Act No. 144 of August 10, 1995, known as the “General [Corporations] Act,” §§ 941 et seq. of Title 5, and the provisions of the Civil Code of Puerto Rico of 1930, as amended, concerning associations and trusts, and pursuant to the provisions of subsequent acts of the abovementioned statutes. Regardless of the provisions of Act No. 50 of August 4, 1994, the appearance of the cooperative or its authorized representative shall be sufficient for the purpose of creating subsidiary enterprises, without requiring the presence of multiple incorporators.
The establishing and investment in second-degree financial enterprises shall be performed according to the standards adopted by the Corporation, which shall take into consideration among other matters:
(1) Authorization and recognition of permissible administrative activities which shall include the activities permitted to other financial institutions and their subsidiaries;
(2) maximum investment in financial enterprises;
(3) participation of directors and executive officials of savings and loan cooperatives on the boards of directors and management of the financial enterprise;
(4) internal controls and standards of ethics to avoid conflicts of interest, and
(5) controls and restrictions, if any, of the transactions between affiliated enterprises.
The operations of the financial enterprises shall be subject to external auditing by a certified public accountant. With regard to these enterprises, the Corporation shall have all the powers it possesses pursuant to this chapter, §§ 1334 et seq. of this title, and any other special laws that apply to it.
(c) Investment in non-financial cooperative enterprises. — Cooperatives may sponsor, promote, furnish financing, invest and participate as members or preferred stockholders that provide multiple services in cooperative enterprises engaged in commercial, industrial, agricultural activities, or that otherwise contribute to the creation of jobs, to encourage production or one development or integration of the cooperative movement. The Corporation shall adopt through regulations, the specific standards that shall govern the investments by cooperatives in cooperative enterprises, including:
(1) Total maximum investment in cooperative enterprises;
(2) maximum investment, for each cooperative enterprise;
(3) maximum proportion of the shares of the cooperative enterprise;
(4) areas of the economy for the development of cooperative enterprises;
(5) participation of directors and executive officials of the savings and loan cooperatives in the boards of directors and management of the cooperative enterprise;
(6) internal controls and standards of ethics to avoid conflicts of interest;
(7) controls and restrictions of transactions between affiliated enterprises, and
(8) process of authorizing, organizing or investing in non-financial cooperative enterprises.
The regulations of the Corporation shall have the purpose of enabling the investments of the savings and loan sector in the development of diverse types of cooperative enterprises within a framework of financial prudence and sound management.
Non-financial departments converted to subsidiaries pursuant to Act No. 172 of August 12, 2000, shall be treated as non-financial cooperative enterprises authorized under this chapter. With regard to these subsidiaries, a reduction of its assets or its operations shall not be required by virtue of limitations adopted by new regulations, with regard to the total amount of allowable investment in non-financial cooperatives, and subsequent increases in investments by the parent cooperative, in the event that the original investment of the parameters adopted by regulations is exceeded.
(d) Tax exemptions. — Wholly owned (100%) subsidiaries, second-degree financial enterprises and non-financial cooperatives shall enjoy the same tax exemptions that are granted by § 1366g of this title.
(e) Cooperatives that establish wholly-owned (100%) subsidiaries, second degree financial enterprises or non-financial cooperatives, shall adopt reasonable policies and procedures that preserve the separate corporate identity of these entities and the limitation of the financial accountability of the parent company. Provided, That the wholly-owned (100%) subsidiaries, the second degree financial enterprises or non-financial cooperative enterprises may use the initials “COOP” in their official or business names.
History —Oct. 28, 2002, No. 255, § 2.06.