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Introductory Business Guide: Mexico’s Legal Overview

Rivadeneyra, Treviño & De Campo

Interlegal Permanent Officer

First published in 2019 - Updated from time to time.

Introduction

In 2019, Interlegal published its first joint book called Legal and Tax Issues Around the World - Starting and Growing a Business. It is the result of collective work with the accountants' firms network EuraAudit. This article aims to introduce the legal environment of Mexico for entrepreneurs who are interested in forming and financing their business in this country. Note that it is not equivalent to a complete professional analysis. Through this introductory guide, the network intends to help entrepreneurs to craft the questions they need to ask themselves in order to start, operate, and see their business thrive on the global stage. Therefore, Interlegal encourages entrepreneurs to obtain legal advice with Rivadeneyra, Treviño & De Campo's firm on the issues arising from starting and running a business in Mexico.

Legal Overview

Executive Summary

Pursuant to the Mexican Federal Commerce Code, in Mexico, foreigners are free to undertake usual acts of commerce, subject to individual treaties between a foreigner’s home country and Mexico. Foreign traders, are, however, subject to Mexican Legislation. Companies legally incorporated abroad, or that may have an agency or branch in Mexico, may also exercise acts of trade, subject to Mexican laws concerning such entities and subject to the jurisdiction of the courts of the Mexican Nation.

Incorporating a Company

Companies incorporated in Mexico are regulated by the Mexican General Mercantile Corporations Law (Ley General de Sociedades Mercantiles) and the Mexican Federal Commerce Code (Codigo Federal de Comercio). They may also be subject to comply with other legislation depending on their individual business activities.

The main requirements to incorporate a company in Mexico are the following:

A minimum of five legal company names must be submitted to the Ministry of Economy for authorization. This process may take up to 2 weeks and is free of cost.

The type of company must be selected. The two main types of companies are the Sociedad Anonima and the Sociedad de Resposabilidad Limitada.

“Sociedad Anonima”:

This is a company of two or more shareholders whose liabilities for the company’s acts are limited to the payment of their issued stock shares according to their capital contribution.

The stock shares are negotiable and the shareholders have to subscribe at least one share in order to incorporate the company.

The minimum capital stock is usually Pesos 50,000.00, which is required to be entirely subscribed at the point of incorporation.

The incorporation of the company must be formalised either before a notary public, public broker, or by public subscription.

The administration of the company is conducted by a Sole Administrator or by two or more members of a Board of Administration.

A Statutory Auditor must be named by the company, which will mainly audit and supervise the actions of the Board of Administration.

“Sociedad de Resposabilidad Limitada”:

This is a limited liability company, similar to a limited liability company, which is made up of two or more partners, which may be natural persons or corporations, which are only liable for the company’s acts to the payment of their respective equity participations in the company.

The corporate capital shall be divided in non-negotiable equity participations, which can be of different value or class, but always shall be of one Mexican peso or its multiples.

At the point of incorporation of the company, the corporate capital shall be subscribed and paid up to at least the 50% of the value of each equity participation.

There can only be a maximum of 50 partners.

The incorporation of the company may only be formalised either before a notary public or a public broker. It cannot be by public subscription.

The administration of the company is conducted by a General Manager or by a Board of Managers.

Both types may be also constituted as “de Capital Variable”, which means that they have variable capital stock and, subject to their by-laws, it may be decreased and increased without the need to make any formal amendments to the company’s by-laws.

When a foreign person or corporate entity acts as a shareholder or a partner in the incorporation of a Mexican company, the company’s by-laws are required to state that:

…”. according to the provisions set forth in the Mexican Constitution and in the Mexican Foreign Investments Law, any foreigner who acquires a share or partnerships interest in the company, shall by this simple fact be considered as a Mexican with respect to same, and it shall be understood that said foreigner agrees to not invoke the protection of his/its government, under penalty, in the event of a breach of this agreement, of the loss of said share or interest in favor of the Mexican Nation.”

The object of the company must be defined. The by-laws shall define all the activities which the company shall engage in.

The company’s administration and appointment of members must be defined and listed.

The documentation required from foreign shareholder or partners (natural person) to formalise the incorporation of a company includes passport, migratory form issued by the Mexican National Institute of Migration, a Single Population Register Code (“CURP”) issued only for residents in Mexico and a proof of address. Information such as place of birth, nationality, occupation and marital status also needs to be provided.

The documentation required from foreign Shareholders or Partners (legal person) includes incorporation deed, appointment of legal representative, proof of identity, and proof of tax ID. These documents should be duly certified with an apostille stamp and translated into Spanish, if they are in a different language, by an official translator.

All documents should be duly certified with an apostille stamp and translated into Spanish, if they are in a different language, by an official translator.

The public deed of incorporation must be registered with the Mexican Public Commerce Registry. This may take up to 15 days.

The company is required to be registered with the Mexican Federal Tax Registry to obtain its tax identification which is required to perform any acts of commerce. This process depends entirely with the work load of the Mexican Tax Authority and may be done in a day or may take up to a week.

Company’s Social Obligations

According to the provisions set forth in the Mexican General Mercantile Corporations Law, any company incorporated in Mexico shall mainly comply with the following:

General Shareholders Assembly / General Partners Assembly. This is the supreme body of the company and its resolutions will define the company’s operation as well as impact the decisions of the company. The assembly shall meet at least annually to approve the administration’s annual report, the financial statements of the company and the results of the past year. The assembly will also ratify the administration of the company. The meetings may be Ordinary or Extraordinary, according to the company’s by-laws.

Corporate Books. The company shall have at least the following:

  • A record of the shareholders’ or partner’s’ meeting to include the resolutions adopted by the General Shareholders Assembly and General Partners Assembly.
  • A shareholder’s’ or Partners’ Registry to record the general information of the proprietors of the stock shares and equity participations.
  • If it is constituted as a variable capital company, to record any increase or decrease in capital movements.

The company shall file before the Mexican Tax Authority monthly declaration statements of its operations as well as its annual declaration before March 31st, for the payment of any applicable taxes.

For more details, please contact Fernando Treviño Núnez, Rivadeneyra Treviño de Campo ftrevino@rtydc.com

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