Constituyendo Una Empresa En Inglés

Establishing a business in Mexico.

I. INTRODUCTION

This paper is designed to provide an idea of how to establish a business operation in Mexico,

highlighting key legal issues that a foreign executive should keep in mind, that are generally

applicable to the most common types of Mexican business entities. Special rules obviously

may apply in certain circumstances.

II. SETTING UP A CORPORATION

1. General Information

1.1. Forms of Business Organization

The Mexican law contemplates several forms of business organization, including:

“Joint Stock Corporations“ (sociedades anónimas “SA“, with fixed capital, or Joint Stock

Corporations with Variable Capital “SA de CV“; hereinafter collectively referred to as “JSC“)

and “Limited Liability Corporations“ (sociedades de responsabilidad limitada, “S. de R.L.“ with

fixed capital, or sociedades de responsabilidad limitada de capital variable “S. de R.L. de

C.V.“ with variable capital, hereinafter collectively referred to as “LLC“).

The JSC is the most common form of organization used by Mexican and foreign investors in

Mexico as the liability of the partners is limited to the paymnent of their shares. This section

deals particularly with JSC.

1.2. Capital

In accordance with the General Law of Mercantile Corporations (“GLMC“) upon incorporation

and throughout its corporate life a JSC must have at least two shareholders and a fully

subscribed capital of at least 50,000 Mexican Pesos, 20% must be paid at the time of incorporation.

The nationality of the shareholders need not be Mexican, unless the Law on Foreign Investments

(“LFI“) provides otherwise in exceptional cases and the shares may be held by individuals

and entities; consequently, all of the shareholders of companies that qualify to be wholly

foreign – owned may be foreigners.

The main difference between a SA and a SA de CV is that as regards a SA, the corporate

capital is fixed as specified in its Articles of Incorporation and any subsequent increase or

decrease in the corporate capital requires an amendment of said Articles of Incorporation. On

the other hand, the Articles of Incorporation of a SA de CV determine the amount of the

minimum capital and an additional amount of “variable“ capital. The variable capital may be

increased or decreased without modifying the Articles of Incorporation if so provided for by

the Articles of Incorporation.

Perhaps as a consequence of the above, foreign investors, particularly these with whollyowned

subsidiaries, prefer a SA de CV rather than a SA. The JSC may also be used for

rather small companies managed by a single administrator instead of a Board of Directors

which explains why it is often preferred to other types of corporations such as the LLC.

1.3. Management of a JSC

The management of a Corporation may be vested in one or more Directors. Whenever two or

more Directors are entrusted with the management of a Company, they are required to act as

a Board of Directors, otherwise we speak of a Sole Administrator.

Any shareholder owning 25% or more of the corporate capital, has the right to appoint one

Director. The Board of Directors may appoint one or more Managers. Such appointment is

revocable at any time by the shareholders or by the Board of Directors.

There are no general residency or citizenship requirements for officers or directors. However,

immigration legislation requires that the Sole Administrator or the Members of the Board of

Directors have of a valid FM3-visa, otherwise they will not have the legal authority to execute

legal acts on behalf of the corporation in Mexico with respect to third parties. Apart from that,

the LFI provides that foreign investors may participate in the management of a company only

in proportion to the foreign equity participation in the company.

A minority protection could be provided in the Articles of Incorporation of companies in which

foreign equity participation is restricted to 49% or less, by increasing the quorum and voting

requirements at Shareholders‘ and Board of Directors‘ meetings.

The effects of such provisions are to grant the minority foreign investor a veto power over

Shareholders‘ and Board resolutions relating to fundamental corporate matters (e.g., charter

amendments, reinvestment of profits, capital increases or decreases, appointment of

managers,

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