Legal guide for company directors and CEOs in Peru

ESG obligation for Directors and CEOs

1. Do existing directors’ duties contain obligations that apply to matters that could be categorised as an ESG consideration, e.g. the environment, employee welfare? 

Although there is no specific legislation regarding ESG considerations in Perú, many companies have environmental and social commitments, which they must comply with. There are several companies whose directors include environmental and social aspects in their agendas due to the impact that it could cause in the event of failing to comply with environmental regulations.

In addition, some rules address Corporate Governance practice, which applies to listed (public) companies. Listed companies seeking Corporate Governance recognition, which is voluntary, must submit to BVL (Lima stock exchange) information on their corporate governance.

At the end of this year, the ESG index will be incorporated in the local market, replacing the current “Corporate Governance” index. Environmental, social and corporate governance aspects will be incorporated into the measurement (currently, only measures aspects of corporate governance).

2. Are there other obligations of directors that relate to ESG considerations, e.g. health and safety, gender pay inequality, etc.?

There is no legal obligation for the board of directors to implement ESG considerations. However, several companies pursue a better governance practice, taking into consideration social and environmental practices. For example, it is highly common for corporations to have policies to protect against sexual misconduct, including topics related to gender pay inequality, and, further, politics encouraging diversity.

3. What recent changes have occurred or are expected with respect to directors’ responsibilities in relation to ESG considerations?

In 2021 Act N° 31072 and its Regulation provided for the possibility of all types of companies to adopt the general interest company (BIC in the Spanish acronym) legal status, which entails having a societal and environmental purpose beyond shareholders' profit and interests. The directors of such companies must:

  • Ensure the real achievement of the purpose of social and environmental benefit defined in its bylaws.
  • Be responsible for identifying any lack of compliance with the obligations assumed by the company.
  • Introduce organizational transparency practices.
  • Entrust an independent third party with the preparation of a management report on the impact of society, about the societal and environmental purpose.

4. What obligations do directors have in relation to ESG disclosure and/or reporting?

There are no obligations in relation to ESG disclosure or reporting. Sustainability reports remain voluntary


Directors duties and responsibilities

1. What form does the board of directors take?

In Peru all companies have a single board; however, the creation of committees within a board is permitted. 

2. What is the role of non-executive or supervisory directors?

Peruvian law does not distinguish between executive and non-executive or supervisory directors; all directors have the same roles, functions and responsibilities unless otherwise agreed in the bylaws. 

3. Who can be appointed as a director? 

Anyone can be appointed as a director, except for any person legally declared incompetent or insolvent, public functionaries or conflicted parties. 

Below are certain relevant statutory provisions applying to directors:

  • only persons (and not entities) are eligible for directors’ duties
  • directors are not required to have a Peruvian residency, and there is no nationality requirement, and
  • directors do not need to be employees or shareholders of the company.

4. How is a director appointed?

Typically, shareholders would elect the directors. In such cases, directors are appointed pursuant to certain statutory provisions which, broadly, grant each shareholder as many votes as shares, they hold, with the capacity to distribute or concentrate part or all of their votes among one or more candidates. Candidates who accumulate the most votes will be appointed as directors. Bylaws may include a different directors’ selection mechanism, to the extent that any such mechanism provides the shareholder’s minorities with equal or more Board representation

The Board may recompose itself (by designating new directors) only in case of vacancy and to the extent: (i) that there are no substitutes or alternate directors elected; or (ii) not agreed otherwise in the bylaws.  
Certain aspects to consider: 

  • a director will typically be appointed either in the company’s incorporation, by resolution of a shareholders’ meeting, or by the existing directors
  • a chairperson is required
  • the board must consist of at least three directors, and there is no maximum number of directors
  • the board term shall be between 1 and 3 years; however, even if its term has ended, the board will continue its duties until the appointment of a new board, and 
  • directors may be re-elected unless otherwise provided in the bylaws.

5. How is a director removed from office?

The shareholders’ meeting may remove directors at any time. Peruvian Corporate Law does not provide any indication as to the proceeding required to remove directors; however, the same minorities representation required for the original appointment (as explained above) is applicable.

6. What authority does a director have to represent the company?

The board has all capacities to represent the company except for any matters statutorily reserved for the shareholders’ meeting. 

Unless the board or the shareholders’ meeting approves resolutions that grant powers of attorney to a director, or the company’s bylaws establishes otherwise, directors (outside the board) are not representatives and have no powers of attorney to act on behalf, of the company.

7. How does the board operate in practice?

The chairman of the board calls the board at intervals or opportunities specified in the bylaws and whenever he or she deems necessary, or when requested by any director or the general manager. In the event of failure to do so, the board may be called by any director.  

Except to the extent provided otherwise in the bylaws, the board will be summoned by notice, with acknowledgement of receipt, no less than three days in advance of the meeting. A minimum quorum (attendance) of half the board members is required (although the bylaws may provide for a higher minimum quorum to the extent that such minimum does not require the attendance of all board members). Each director is entitled to one vote, and all decisions are agreed with at least the simple majority of the directors attending the meeting (although bylaws may also provide for higher majorities). 

8. What contractual relationship does the director have with the company?

Appointment as a director does not by itself constitute a contract with the company. The nature of the relationship between a company and its directors is a legal one, not contractual, meaning that it originates from Peruvian Corporate Law; although it is possible to enter into a contractual relationship to regulate the appointment. Bylaws will generally entitle a director to remuneration on terms agreed by the shareholders’ meeting.

9. What rules apply in respect of conflicts of interest?

Directors are compelled to take all board decisions in the best interests of the company. Peruvian Corporate Law requires that directors may not pass resolutions that serve their own personal interests or business, or those of a related third party. Also, directors may not participate, directly or indirectly, in activities competing with those of the company without the express consent of the company.

Any conflicted director must refrain from participating in the deliberation and resolution of any conflicted matter; failure to do so will generate liability for any damages caused to the company as a consequence of any such actions.

10. What other general duties does a director have?

Directors have general fiduciary duties to act with due diligence and confidentiality regarding the business and information to which they have access in connection with their position. 

11. To whom does the director owe duties?

Directors owe duties to the company itself, not to its shareholders.

12. How do the director’s duties change if the company is in financial difficulties?

The board of directors is obliged to call a shareholders’ meeting immediately if: (i) the company’s equity is reduced by half according to the last financial statements, or if such reduction should be presumed; or (ii) the company’s assets are not sufficient to pay for its liabilities. In any of the referred situations, and within 15 days following the date of the shareholders’ meeting, the board is obliged to call the creditors and request, if applicable, the company’s insolvency declaration.
Within a bankruptcy procedure, directors must also comply with certain information duties on behalf of the company.

13. What potential liabilities can a director incur?

Directors are liable, without limit and severally and jointly, to the company, shareholders and third parties for damages caused by decisions or agreements contrary to the law, bylaws or by those acts performed with willful misconduct, fraud or gross negligence. 

The shareholders’ meeting is required to agree in advance corresponding resolutions to file actions against any such director. Also, a one-third grouping of total shareholders is entitled to file actions against a director. The proceeds or assets obtained as a consequence of such claims are received by the company, and shareholders have the right to be reimbursed for the expenses of the proceeding. 

While possible, directors will not generally incur direct liability to individual shareholders or third-parties as direct liability requires the absence of damages caused to the company, and directors’ actions and responsibility will typically affect the company.  

14. How can a director limit his/her liability?

Directors can limit their liability: (i) in respect of a resolution agreed by the board – by voting against it and leaving proof of their discordant vote or position in the corresponding board minute; (ii) in respect of a conflict of interest – by refraining from participating in the deliberation and resolution of the conflicted matter and leaving proof of it in the corresponding board minute; and (iii) duly informing the shareholders of any board decision that may be deemed questionable. 
Companies may grant additional indemnities to their directors.