The main business organisations in Mexico are governed by the General Law of Business Companies (Ley General de Sociedades Mercantiles) and are as follows:
Any of these may be incorporated or converted into a variable capital company, in which case the company must add the words “of variable capital stock” (“de capital variable”) to its corporate name. Variable capital companies are typically preferred as there are fewer formalities involved in adjusting the variable portion of their capital stock.
Except for simplified corporations, business corporations are set up before a public notary, and their formation or incorporation deed is registered before the Public Registry of Commerce.
Limited liability companies and corporations are the most common form of business organisations for conducting business in Mexico.
Limited Liability Companies
Two or more partners can set up a limited liability company, but the number of partners must not exceed 50. The partners in a limited liability company are liable only to the extent of their equity contribution. Any person who is not a partner but allows the use of their name in the name of the company is liable for the company’s transactions up to an amount equal to the largest equity contribution in the company.
Equity interests are not represented by stock certificates, nor are they freely transferable. The admission of new partners and any assignment or transfer of equity interests must be approved by the partners representing at least the majority of the capital stock, unless the company’s by-laws provide for a higher proportion. In general, such consent is not required when an equity interest is transferred by inheritance.
The partners have a right of first refusal if any other partner transfers equity shares. Should several partners intend to exercise this right, it will be exercised in proportion to their contributions.
Limited liability companies are required to keep a Special Partners Book that details the name, address, contributions, and taxpayer registry number of each partner and any transfer of their equity interests. Transfers are only effective upon registry in this book, and a notice of the registry will be published on an electronic platform operated by the Ministry of the Economy.
In practice, limited liability companies may also keep a Book of Minutes of Partners’ Meetings, a Book of Variations to Capital Stock, and a Book of the Board of Managers’ Meetings.
Given that a limited liability company may qualify as a pass-through entity for US tax purposes, US companies frequently use this type of company as a subsidiary in Mexico.
Corporations
Corporations are regulated by the General Law of Business Companies. However, they may adopt the form of a promotion investment corporation (sociedad anónima promotora de inversión, or SAPI), which is also regulated by the Securities Market Law (Ley del Mercado de Valores).
Companies with shares that are publicly traded are incorporated as corporations. These may either be a stock corporation (sociedad anónima bursátil or SAB) or a stock promotion investment corporation (sociedad anónima promotora de inversión bursátil, or SAPIB). See 1.3 Corporate Governance Requirements for Companies With Publicly Traded Shares for more information.
Corporations are formed by two or more shareholders whose liability is limited to the payment of their shares. Such shares are represented by certificates that are freely transferable unless otherwise provided for in the company’s by-laws or a shareholders’ agreement.
Corporations are required to keep a Book of Minutes of Shareholders’ Meetings, a Book of Variations to Capital Stock, and a Share Registry Book. The Share Registry Book must contain, among other items, the name, address, nationality, and taxpayer registry number of the shareholders, details on the shares held by each shareholder, and the contribution payments and transfers made.
Transfers of shares are effective upon the endorsement of the share certificate to the acquirer and the registry of the transfer in the Share Registry Book. A notice of such registry shall be published on an electronic platform operated by the Ministry of the Economy.
In practice, some corporations governed by a board of directors choose to maintain a corporate book documenting the meetings of this governing body.
According to the General Law of Business Companies, the shareholders of corporations have certain minority rights, such as the following.
Promotion Investment Corporations
Promotion investment corporations (SAPI) are companies regulated by the Securities Market Law and the General Law of Business Companies. The SAPI was created to promote capital risk investments by providing more flexibility to agree on several issues that were considered relevant for investors and granting minority rights with a lower participation percentage.
As stated, a SAPI is a variation on a regular corporation. Several amendments to the regulation of corporations have reduced the number of differences between both types of entities.
However, there are still some relevant distinctions between them, as follows:
Shareholders in a SAPI may:
Shareholders in corporations cannot be excluded from profit sharing. SAPI may issue shares with special rights regarding profit sharing and other economic rights that expand or limit the shareholders’ rights over profits.
Corporate governance requirements are outlined mainly in the General Law of Business Companies and, for the SAPI, SAB and SAPIB, in the Securities Market Law. The laws apply at federal level and to all companies in Mexico, irrespective of the state of incorporation of the company.
Corporate governance requirements are also outlined in the companies’ corresponding by-laws and, when applicable, in shareholder agreements.
For entities whose operations are subject to governmental approval, certain corporate governance requirements may be prescribed by the relevant regulatory framework.
For example, multiple-purpose financial companies (sociedades financieras de objeto múltiple, or SOFOMs), besides complying with the General Law of Business Companies (and the Securities Market Law if the SOFOM is also a SAPI), must comply with the requirements of corporate name and corporate purpose set forth in the General Act on Credit Organizations and Related Activities (Ley General de Organizaciones y Actividades Auxiliares del Crédito).
Certain corporate requirements may also be found in tax legislation. For example, the Federal Fiscal Code (Código Fiscal de la Federación) states that the shareholders’ taxpayer registry number must be annotated in the Special Partners or Share Registry Books, as applicable. Furthermore, companies are also obliged to file a notice before the tax authorities on any change of partners or shareholders.
Companies with shares that are publicly traded must comply with the provisions of their by-laws, the Securities Market Law and, in the absence of a specific rule, the provisions of the General Law of Business Companies.
As discussed in 1.1 Forms of Corporate/Business Organisations, there are two types of companies whose shares can be publicly traded, the SAB and the SAPIB.
The SAPIB was created to promote the access of medium-sized companies to the financial public markets in Mexico. However, most of the companies whose shares are listed on the Mexican Stock Exchange are incorporated as SABs.
The shareholders of SABs are entitled to minority rights, including the following.
In addition, the shareholders are permitted to:
Management of SABs is entrusted to the board of directors and a chief executive officer (director general). The board of directors may consist of up to 21 members and at least 25% of them must be independent members. See 4.5 Rules/Requirements Concerning Independence of Directors for more information on independence criteria.
For each proprietary director, an alternate director may be appointed. It is important to note that alternate directors for independent directors must also meet the independence criteria.
The board of directors of an SAB is supported by the Corporate Practices Committee and the Audit Committee. These must each have three or more members, who must be independent. In SABs controlled by a person or group of people with 50% or more of the capital stock, the Corporate Practices Committee may comprise at least a majority of independent members that will be disclosed to the public.
SABs have no statutory auditor. Monitoring of the company’s activities is entrusted to the board of directors, through its Corporate Practices and Audit Committees, and to the external auditor.
The General Law of Business Companies was amended in October 2023 to incorporate provisions permitting remote meetings of shareholders, partners, directors, or managers. Mechanisms or measures must be implemented to facilitate access, verify the identity of attendees, and facilitate voting. This is a significant amendment. However, to take advantage of this change, amendments to the by-laws are necessary to expressly allow remote meetings.
In December 2023, amendments to the Securities Market Law were introduced to increase the number of companies with publicly traded shares. These changes allow SABs to issue shares with varying rights and restrictions. This flexibility enables founders or owners of companies to maintain control of the company by offering shares with limited corporate rights when opting to list and offer shares to the public.
Likewise, and in contrast to private corporations, where authority rests solely with the general shareholders’ meeting, SABs and SAPIBs now have the option to delegate authority to their board of directors to increase the capital stock and also determine the terms of the subscription of the shares.
Under the amendment to the Securities Market Law carried out in December 2023, the Ministry of Finance and Public Credit (Secretaría de Hacienda y Crédito Público) is authorised to issue general provisions on matters related to sustainable development, as well as to strengthen gender equality, aimed at promoting, informing, and evaluating the adoption of best practices in such areas by SABs, SAPIBs and other securities issuers. Before the issuance of such provisions, the Ministry of Finance and Public Credit is required to hear the opinion of the National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores) and the Mexican Central Bank (Banco de México).
In April 2024, the Senate endorsed a reform to the Law of Business Chambers and Confederations (Ley de Cámaras Empresariales y sus Confederaciones) which seeks to promote responsible business conduct and diligent behaviour with respect to human rights, and acknowledges that business activities may have negative consequences for both the environment and society. The proposal has not completed the legislative process, and is not yet in force. If approved, the regulation will not be mandatory for all companies; however, its principles may influence some members of chambers.
The main bodies involved in the governance and management of a corporation are the shareholders’ meeting and the board of directors.
Certain companies may also have committees that aid the company’s managing body (eg, Auditing and Corporate Practices Committees). Such committees are mandatory for publicly listed companies, as discussed in 1.3 Corporate Governance Requirements for Companies With Publicly Traded Shares.
For private companies, statutory auditors also play an important role in monitoring the activities of the company’s management body.
The general shareholders’ meeting is the most important corporate body within a corporation. It may approve and ratify all acts and operations of the company, and its resolutions are carried out by the person specifically appointed for this purpose or, in the absence of such an appointee, by the sole manager or by the board of directors. See 5.3 Shareholder Meetings for further information.
The board of directors in a private company usually resolves on the granting of powers of attorney, the approval of the annual report that will be presented to the shareholders’ meeting, approval of transactions, and appointment of the company’s high-ranking officers.
The board of directors in publicly listed companies must approve, among other matters (and with the prior approval of the appropriate committee) the policies and guidelines for the use of the company’s (and its subsidiaries’) assets by related parties, transactions with related parties, unusual transactions or transactions exceeding certain thresholds, policies for the granting of any loan, financing or guarantee, accounting policies, engagement of external auditors, and guidelines for internal control and internal audit.
The board of directors does not have the authority to approve any matter that the law reserves for the approval of the shareholders’ meeting, such as those reserved for extraordinary meetings that are detailed in 5.3 Shareholder Meetings.
However, there may be exceptions for publicly listed companies, such as the authority that may be delegated to the board of directors to increase and reduce the SAB’s or SAPIB’s capital stock.
These bodies generally make their decisions at meetings, subject to specific rules.
See 5.3 Shareholder Meetings for details on the rules applicable to the shareholders’ meetings.
Unless a higher percentage is set in the company’s by-laws, meetings of boards of directors’ are considered legitimate when at least 50% of the board members are present, and resolutions are considered legitimate when approved by majority vote. Unless the by-laws state otherwise, the president of the board has a casting vote in the event of a tie. If allowed by the company’s by-laws, the members of the board of directors may approve decisions outside of a meeting, if their resolutions are unanimous and confirmed in writing.
The board of directors is comprised of two or more members appointed by the shareholders’ meeting, and will include at least a chair from this managing body.
The General Law of Business Companies does not set forth a maximum number of members for the board of directors, or any independence requirements. The number of members of the board of directors must be stated in the company’s by-laws.
See 1.3 Corporate Governance Requirements for Companies With Publicly Traded Shares for details on the board structure of publicly listed companies.
The board of directors has a chairperson and, in certain cases, a secretary.
Besides having a casting vote, the chair is authorised to represent the board in the execution of acts (if no delegate has been appointed with this purpose).
In publicly listed companies, the chair of the board may suggest the members to be appointed as members of the company’s committees, on the understanding that the chair of the board of directors cannot be chairperson of any of the committees.
Private companies are not required to have a board secretary. However, a secretary (who may or may not be a member of the board) is usually appointed, and is in charge of keeping corporate records and issuing certificates on shareholding structure or other corporate information.
In an SAPIB, the secretary of the board of directors must certify the company’s shareholding structure if the company would like its shares registered on the stock exchange.
In an SAB, the board of directors must appoint a secretary who is not a member of the board of directors but who must comply with most of the obligations and duties applicable to the members of the board. The secretary must review and confirm that the shareholders are duly represented at shareholders’ meetings, and must certify the authenticity or truthfulness of certain corporate documents that must be filed before the securities authorities.
Even when there are no specific requirements for the composition of a private company’s board of directors, the Code for Best Corporate Governance Practices issued by the Mexican Business Council (Consejo Coordinador Empresarial), recommends appointing no less than three and no more than fifteen members.
In addition, for private companies, the Code suggests that:
Those who are legally disqualified from engaging in commercial activities may not serve as members of the board. Additionally, for publicly listed companies, no person who has held the position of external auditor of the company (or any of the entities of its corporate group) during the 12 months immediately preceding the date of appointment can be appointed as a member of the board of directors.
Members of the board of directors are appointed and removed by the general shareholders’ meeting. In publicly listed companies, the board of directors must approve the election, appointment, and removal of the chief executive officer and their compensation. Approval by the board is also required for the guidelines for appointing and compensating other high-ranking officers.
Independence
There is no mandatory independence requirement for the members of the board of private companies. In publicly listed companies, at least 25% of the members of the board must be independent.
The independent directors and, if applicable, their respective alternates, should be chosen based on their experience, capacity, and professional reputation. They must fulfil their duties without conflicts of interest and without being influenced by personal, financial, or economic factors. The independence of directors will be evaluated by the general shareholders’ meeting during their appointment or ratification.
The following individuals do not qualify as independent.
Conflicts of Interest
If a member of the board of directors has a conflict of interest with respect to a particular transaction, they are required to disclose this to the other directors and abstain from voting on the matter. Any director found to violate this provision will be held liable for any damage or losses incurred by the company.
The same principle applies for publicly listed companies. According to the Securities Market Law, board members (and the secretary) are prohibited from participating in the discussion of such matters, and their absence shall not affect the required quorum for the board to be considered legally convened. Breaching this rule and failure to disclose the conflict of interest is considered a violation of the director’s duty of loyalty.
Directors and officers are required to act according to the company’s by-laws and all relevant laws and regulations. The duties of officers may also be outlined in an agreement.
Directors are obliged to maintain confidentiality regarding any matters or information to which they gain access in the course of their duties. However, exceptions to this rule exist when such information is requested by judicial or administrative authorities. This confidentiality obligation is valid throughout their tenure and for one year afterwards.
Furthermore, members of the board of directors are jointly liable for the following:
Additionally, directors are jointly and severally liable with their predecessors for any known misconduct that they do not report in writing to the statutory auditor.
In publicly listed companies, the members of the board of directors are also expressly bound by the duty of care and the duty of loyalty.
Under the duty of care, the members of the board of directors are required to perform their duties diligently, in good faith, and in the best interests of the company. Members of the board of directors are considered to have breached their duty of care when they:
Members of the board of directors breach their duty of loyalty when, among other examples, they:
Directors owe their duties to the company, and, in the case of publicly listed companies, the legal entity controlled by the company or in which the company has significant influence. That is why any liability action is considered to be exclusively in favour of such entities, regardless of the person or group that initiates it.
In publicly listed companies, members of the board of directors are not individually or jointly liable for damages or losses incurred by the corporation (or entities controlled by the company, or in which the company has significant influence), provided they act in good faith and meet various conditions, which include the following:
The liability of directors may only be demanded by a resolution of the general shareholders’ meeting. Directors who have been removed due to alleged liability can only be reinstated if the judicial authority deems the action against them to be unfounded. Upon the resolution by the general shareholders’ meeting demanding their liability, directors will cease to perform their duties.
See 5.4 Shareholder Claims for information on requirements to initiate a liability action for private and publicly listed companies.
The liability of board members of publicly traded companies for damages caused due to their lack of diligence shall be joint and several among those responsible for the decision or for preventing the board from legally convening.
This liability may be limited, as specified in the by-laws or by resolution of the general shareholders’ meeting, provided the actions in question are not fraudulent, in bad faith, or unlawful. Stock corporations may provide indemnifications and insurance coverage for board members, except in cases of fraudulent, bad faith, or unlawful acts.
Corporations and SAPIs are also permitted to expressly set forth in their by-laws limitations to the liability of the members of the board of directors or other high-ranking officers, provided that such acts are not fraudulent, in bad faith, or unlawful.
Remuneration of the members of the board of directors may be determined in the company’s by-laws. In their absence, the ordinary shareholders’ meeting shall determine such remuneration.
In publicly listed companies, the board of directors must approve the remuneration for the chief executive officer and the guidelines for appointing and compensating other high-ranking officers.
Members of the board of directors shall receive no payment that may be considered to breach their duty of loyalty or any other of their duties.
Private companies are not required to disclose the compensation or any other amount paid to their directors or officers.
For public disclosure, publicly listed companies shall deliver to the National Banking and Securities Commission and the corresponding stock exchange, periodic reports, including information concerning the chief executive officer’s compensation and guidelines for appointing and compensating high-ranking officials.
Public listed companies’ annual reports that are disclosed to the public provide information on the aggregate compensation paid to the board of directors and other high-ranking officers of the company.
The shareholders are the owners of the company. The relationship between the shareholders and the company is governed by law, the provisions of the company’s by-laws, and, if applicable, by any shareholders’ agreement.
Shareholders are not required to participate in the company’s management. Directors may or may not be shareholders. If the shareholders are not members of the board of directors, they may not be able to direct the management of the company unless they have the right to appoint a member of such a body.
Besides appointing a member of the managing body, shareholders may have an impact or influence on the actions of the business by exercising the corporate rights that they are entitled to depending on the percentage of shares held, such as calling meetings, delaying votes, or exercising a liability action against the company’s management.
The general shareholders’ meeting is the most important corporate body of a corporation. It may approve and ratify all acts and operations of the company, and its resolutions are carried out by the person specifically appointed for such purposes or, where there is no designation, by the sole manager or the board of directors.
Meetings must be held in the company’s corporate domicile, which is a territory (usually a city) indicated in the by-laws. They can take place remotely if the by-laws allow.
The by-laws may also allow the adoption of resolutions outside a meeting if approved by a unanimous vote of the shareholders representing all the voting shares, provided that they are confirmed in writing.
Shareholders’ meetings of corporations are divided into ordinary and extraordinary meetings. Ordinary meetings solve any matter not reserved for an extraordinary meeting. While an ordinary meeting can be convened at any time, the law mandates that such a meeting must be held at least once a year, within the first four months of each calendar year, to address any matter of the agenda in addition to: (i) approving the annual report of the managing body; (ii) appointing or ratifying the appointment of the members of the managing and surveillance bodies; (iii) if applicable, approving the compensation of directors and statutory auditors.
Extraordinary meetings are held whenever required to resolve any of the following matters of the corporation:
A corporation’s ordinary meeting is deemed to be legally convened when at least half of the capital stock is represented in the meeting, and its resolutions are deemed valid when adopted by the majority of the votes present. In contrast, an extraordinary meeting is legally convened when at least 75% of the capital stock is represented, and its resolutions are valid when approved by shareholders at the meeting representing at least half of the capital stock.
If it is not possible to convene the meeting on the date it was called (usually for lack of quorum), a second meeting will be called and the items on the agenda resolved irrespective of the number of shares represented on the understanding that extraordinary meetings always need to be approved by shareholders at the meeting representing at least half of the capital stock to approve an item.
Companies’ by-laws may set higher percentages for either type of meeting to be deemed legally convened and to adopt resolutions.
Shareholders may be represented in the general shareholders’ meetings by attorneys-in-fact. Such representation shall be conferred upon on the terms outlined in the by-laws or, where there is no provision, in writing. This special power of attorney is usually granted through a proxy letter (carta poder). Directors and statutory auditors are not permitted to represent shareholders in a shareholders’ meeting.
If a corporation has multiple categories of shareholders, any proposal potentially affecting the rights of a specific category must first be approved by that affected category convened in a special meeting. Resolution by the special meeting requires the same majority that is required for the amendments of the by-laws of the corresponding company, and must consider the total number of shares within the affected category.
Special meetings must adhere to most of the rules applicable to general meetings, such as the meeting being held at the corporate domicile (or remote attendance if allowed by the by-laws), procedures for calling the meeting, and representation of shareholders, among other requirements.
Shareholders representing at least 25% of the capital stock are entitled to bring a liability action against board members, provided certain requirements are met. Firstly, the claim must encompass the total amount of liabilities in favour of the corporation, rather than solely representing the personal interests of the plaintiffs. Additionally, if applicable, the plaintiffs must not have voted in favour of the resolution adopted by the general shareholders’ meeting that bars them from proceeding against the defendant directors. Any assets obtained because of these actions will be received by the corporation.
Liability actions in a publicly listed company may be initiated by the SAB or by the SAB’s shareholders that hold at least 5% of the capital stock represented by shares granting full voting rights, limited voting rights, or that have no voting rights. In this case, the action will only favour an SAB or, in certain cases, the company controlled by the SAB or in which the SAB has a significant influence, that suffers property damage.
The ordinary statute of limitations in commercial matters is ten years. However, the statute of limitations is five years for any actions derived from the by-laws and any corporate transactions in connection with any rights and obligations between the corporation and the shareholders (including any action among shareholders). The Securities Market Law expressly sets forth that an action for which accountability from the members of the board of directors is sought will be subject to a five-year statute of limitations, starting on the day on which the act or event causing the corresponding property damage occurred.
Certain acquisitions of publicly listed securities trigger a disclosure obligation. A person or group of people who acquire, directly or indirectly, in one or several simultaneous or successive transactions of any nature, the common shares of a publicly listed company, resulting in a shareholding equal to or greater than 10% and less than 30% of such shares, will be obliged to disclose such circumstance.
If the acquisition was carried out by a group of people, they must disclose the individual holdings of each of the members of the group. Likewise, the acquirers must disclose whether they intend to acquire significant influence in the company.
If any related party (as defined by the Securities Market Law) of the publicly listed company increases or reduces its ownership stake in the company’s capital stock by 5%, whether directly or indirectly, in one or several simultaneous or successive transactions of any nature, it must disclose such information to the public.
Furthermore, any person or group of people who directly or indirectly hold 10% or more of the shares representing the capital stock of publicly listed companies, as well as the members of the board of directors and relevant officers of such companies, must inform the National Banking and Securities Commission and, in certain cases, disclose to the public the acquisitions or transfers of such securities.
Likewise, shareholders are required to inform the publicly listed company of the execution of any shareholders’ agreement so that the company can disclose it to the public. These agreements are not binding on the company, and their violation does not invalidate votes at shareholders’ meetings. However, they are enforceable between the parties only after public disclosure.
Publicly listed companies are obligated to submit a report upon the initial registration of their securities and annually thereafter detailing the name and shareholding of several parties, including the companies and individuals that are beneficiaries, whether directly or indirectly, of 5% or more of the company’s capital stock.
Disclosure must be made through the relevant stock exchange and under the terms and conditions established by such stock exchange.
Companies must hold an annual general shareholders’ meeting that must review and, if applicable, approve the following:
Failure to submit the annual report on a timely basis will be grounds for the general shareholders’ meeting to remove the sole manager or the members of the board of directors or the statutory auditors without prejudice to any action against them for any liabilities they may have incurred.
Within the 15 days following the date of the annual general shareholders’ meeting, the shareholders may request that the financial statements be published on the electronic platform of the Ministry of the Economy. This is not a mandatory, and it is not customary.
Publicly listed companies must disclose periodic financial and accounting information set down mainly in the Securities Market Law and the General Provisions for Securities Issuers (Disposiciones de Carácter General Aplicables a las Emisoras de Valores y a otros Participantes del Mercado de Valores), based on the requirements and instructions stipulated therein. Among other things, this includes the submission of an annual report signed by the chief executive officer, as well as officers from the legal and financial departments of the company, and the external auditor.
There is no legal requirement for private companies to disclose their corporate governance arrangements.
However, disclosure requirements for publicly listed companies include the following:
Companies’ incorporation deeds must be registered before the Public Registry of Commerce. Any person who acts on behalf of the company before the corresponding registry is made will be joint and severally liable for any act carried out.
The Public Registry of Commerce maintains records for all registered companies, allowing the public to obtain copies that provide certain information on registered acts. However, copies of the actual registered documents are not publicly accessible. The provided information typically includes details such as changes in corporate name, registered corporate domicile, fixed capital amount, and granted powers of attorney, among others. However, it does not include the current shareholding structure of the company.
Companies that have foreign shareholders must be registered before the National Registry of Foreign Investments (Registro Nacional de Inversiones Extranjeras).
Registered companies are required to do the following.
The threshold amounts that trigger the obligation to file periodic notices before the National Registry of Foreign Investments are subject to updates or modifications by the authority.
Companies failing to make the necessary filings before the National Registry of Foreign Investments will be subject to fines. No public information is available in connection with these filings.
Closely held companies are not required to appoint an external auditor. However, this appointment is mandatory for publicly listed companies since the external auditor plays a significant role in reviewing the company’s financial information, which is periodically disclosed to the public.
The key requirements governing the relationship between the publicly listed company and the auditor are outlined in the Securities Market Law.
There are no express provisions about the management of risk and internal controls for private companies.
In publicly listed companies, the board of directors must approve the internal control and internal audit guidelines and must follow up (whether directly or via the Audit Committee) on the company’s main risks, identified based on the information presented by the committees, the chief executive officer, and the external auditor, as well as the accounting, internal control, and internal audit, registration, filing or information systems.
The audit committee of public companies is also obliged to inform the board of directors of the status of the internal control and internal audit system and any irregularities detected.
Publicly listed companies must disclose, annually and quarterly, any amendments made with respect to internal controls and audit. Such changes must have been previously approved by the board of directors and have been approved by the Audit Committee.
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contacto@azizkaye.com www.azizkaye.com/english/index.htmlResults and Expectations From the 2024 Federal Elections
On 2 June 2024, Claudia Sheinbaum of the ruling Morena party was elected as Mexico’s first female president by a wide margin. In addition, Morena consolidated its control of the Congress and Senate, building on its existing majority to nearly capture supermajorities in both houses. These results represent a ratification by voters of the policies and priorities that have governed Mexico since 2018, when Andrés Manuel López Obrador and his Morena movement swept into power.
Ms Sheinbaum is generally viewed as a pragmatic and disciplined politician, strongly committed to consolidating and building on Mr López Obrador’s legacy. Morena is primarily a left-of-centre party (with some factions leaning further left), with a stated priority of fighting poverty and improving social justice. In that context, private businesses and foreign investment are generally viewed as important players in the creation of wealth and growth, but subject to expectations of social responsibility and contribution to the national welfare.
Although it is too early to know with any certainty the specific implications of these results for corporate governance, it can be safely assumed that ESG considerations will continue to gain in strength, as will expectations of corporate social responsibility and accountability. Therefore, companies doing business in Mexico should ensure that their boards and executives keep abreast of developments in their duties and responsibilities and ensure that their corporate governance structures, controls, and procedures are effective and updated, as strong enforcement of certain corporate obligations (eg, tax, environmental, labour relations, human rights, anti-corruption, and others) is a distinct possibility, entailing potential exposure to both corporate and personal liability.
Recent Changes to Applicable Laws
Amendments to the Mexican General Corporations Law
On 21 October 2023, the Mexican General Corporations Law (Ley General de Sociedades Mercantiles) was amended to recognise the possibility for shareholders’, partners’, directors’ and managers’ meetings to be held by electronic, optical, or other permitted technological means. Although not expressly considered in the reform, investment promotion companies (SAPIs or sociedades anónimas promotoras de inversion, a type of corporate modality designed to promote private equity funds and transactions) and publicly traded companies (sociedades anónimas bursátiles), both regulated by the Mexican Securities Law (Ley del Mercado de Valores), will also benefit from this reform, as the provisions of the Mexican General Corporations Law are likewise applicable to them.
Some of the key elements to consider are the following.
Furthermore, specific considerations must be taken into account depending on the type of company involved. For instance, the reform also allows shareholders of a stock company (sociedad anónima), as well as the partners of a limited liability company (sociedad de responsabilidad limitada) to meet at a place other than the corporate domicile, if the alternate meeting place has been approved unanimously by the shareholders or partners, respectively, and their by-laws permit participation via electronic means.
For stock companies, the reform not only grants shareholders the possibility of meeting virtually, but also allows them to receive and access the information regarding the results of the previous fiscal year, for purposes of the annual meeting, by electronic means. Another benefit is that meetings can now be signed electronically, subject to the provisions of the Mexican Code of Commerce governing electronic signatures.
Reform to the Mexican Securities Law
Effective 28 December 2023, the Mexican Securities Law was substantively amended with the goal of making the securities market more efficient, transparent, and sustainable. The regulations for these changes are to be issued by the National Banking and Stock Commission (Comisión Nacional Bancaria y de Valores or CNBV) no later than 365 days from the day after the entry into force of the decree. As of the of this article, the regulations have not been published. The main changes introduced by the amendments are the following.
Simplified issuers and simplified registration of securities
The reform incorporates a new simplified procedure (“Simplified Registration”) for the registration of securities in the National Securities Registry (Registro Nacional de Valores or RNV) to allow certain companies and trusts that are not currently issuers of securities (“Simplified Issuers”) to participate in the Mexican stock market through the public offering of debt or equity securities.
The reform establishes that (i) the Simplified Registration procedure will not be available for the preventive registration of securities (shelf programmes will not be allowed); (ii) the Simplified Procedure will not be available for issuers that currently maintain securities registered in the RNV; and (iii) securities issued under the Simplified Registration procedure may only be purchased by institutional or qualified investors.
The requirements for companies to be considered Simplified Issuers and for the simplified registration procedure will be established in the regulations to be issued by the CNBV and the internal rules of the stock exchanges where the shares are to be listed, neither of which have been issued as of the date of this article.
These changes are expected to be beneficial mostly to small and medium enterprises.
ESG regulation
In terms of ESG regulation, the reform established the obligation of Mexico’s Ministry of Finance and Public Credit (Secretaría de Hacienda y Crédito Público or SHCP), with the prior opinion of the CNVB and the Bank of Mexico, to establish general provisions regarding sustainability and sustainable development, as well as to strengthen gender equity, aimed to promote, inform and evaluate the adoption of best practices by stock exchange corporations, stock exchange investment promotion corporations, issuers, simplified issuers, brokerage firms, central securities depositories, securities rating agencies, among others. However, the reform does not set any guidance or a timeframe for the establishment of these provisions, which have not been published as of the date of this article.
Corporate regime and governance of issuers
The reform also introduces significant amendments to the corporate regime and governance of publicly traded companies (sociedades anónimas bursátiles or SABs) and special investment promotion companies (SAPIBS or sociedades anónimas promotoras de inversion bursátil, a special type of SAPIs intended to be transitioned into SABs).
Among the main changes introduced by the amendments are:
Corporate Governance in the Context of Ethics and Compliance Programmes in Mexico
Introduction
In recent years, the significance of ethics and compliance programmes has been increasingly recognised in Mexico, as more and more companies, business associations, regulatory authorities, and members of civil society, among others, have brought the topic to the forefront of business discussions and social expectations of corporate behaviour. Although the legal system has been slow to catch up to these trends, some statutes and regulations now explicitly or implicitly cover these programmes, with more to be expected in the coming years.
Since an effective ethics and compliance programme invariably requires proper oversight and the modelling of desired conducts (ie, “tone from the top”) by a company’s leadership, its interplay with corporate governance considerations is substantial and intricate. In addition, companies in heavily regulated sectors such as finance, pharmaceuticals, and telecommunications, are subject to specialised regimes that impose additional requirements depending on the risks applicable to such sectors (eg, anti-money laundering, environmental, and data privacy), further complicating their compliance and governance landscape.
This section explores the role of boards of directors and management in ensuring effective oversight and control of ethics and compliance programmes in Mexico, and the potential liabilities and issues arising from the absence thereof.
Corporate criminal and administrative responsibility in Mexico
In 2014, Mexico introduced corporate criminal responsibility into its legal system, marking a significant shift in the country’s statutory and regulatory landscape and in the risk scenario for business entities, their directors and executives, and other stakeholders. This development has underscored the importance of ethics and compliance programmes, as companies can now be held criminally liable for the actions of their employees and representatives.
The list of crimes for which a legal entity can be held liable under the federal criminal code is very broad, numbering into the dozens, including a catch-all for crimes set forth in other statutes. For a company to be held criminally liable, there must have been a “failure to observe proper organizational control”, among other matters.
Although to date there have been few criminal prosecutions of legal entities and the criteria for what constitutes “failure to observe proper organizational control” are unclear, it is fair to assume that most if not all elements of what is generally considered an effective ethics and compliance programme will come into play.
An important development in the legal landscape governing ethics and compliance programmes in Mexico occurred in 2016, with the adoption of the General Law of Administrative Responsibilities. This law was part of a package of major constitutional and legal reforms enacted to create Mexico’s National Anticorruption System and includes a provision detailing the elements of a “corporate integrity policy”, closely modelled on the elements of an effective compliance programme under international standards and best practices. Companies that have adopted an integrity policy can benefit from decreased penalties in proceedings resulting from their participation in illegal administrative acts (ie, acts involving public officials).
More importantly, this law helped to clarify the concept and requirements for ethics and compliance programmes in Mexico. Although not expressly provided for, it stands to reason that this law will inform the discussions around the more ambiguous provisions of the corporate criminal liability statutes and the decisions by judges who will apply them.
In any case, this is clearly an emerging risk area, where corporate boards of directors and management have a vested interest in ensuring that robust ethics and compliance programmes are in place.
Anti-corruption conventions and free trade agreements
Mexico is a signatory to several international anti-corruption instruments, including the OECD Anti-Bribery Convention and the UN Convention against Corruption. These treaties require countries to implement measures to prevent and combat corruption and have developed detailed guidelines and criteria to promote the adoption of effective ethics and compliance programmes by businesses subject to their jurisdictions.
Similarly, the inclusion of corporate ethics and compliance in the context of anti-corruption commitments is a recent development in free trade agreements signed by Mexico, such as the US–Mexico–Canada Free Trade Agreement and the Trans-Pacific Partnership Agreement. Generally, these agreements require signatory countries to adopt books and records requirements for businesses in their jurisdictions and promote the adoption of ethics and compliance programmes, including through the involvement of civil society and business organisations.
Although these agreements do not impose requirements on businesses directly, they have an important impact in creating an environment where companies are increasingly expected to adhere to best practices and standards of corporate governance business conduct.
International and domestic governments, organisations and NGOs
The United Nations (through the Office on Drugs and Crime), the US government (primarily through the Agency for International Development), and other governments and international public organisations have made private sector anti-corruption efforts a priority. They have been devoting resources to implement training and tools for companies to adopt effective ethics and compliance programmes.
Similarly, another factor that has played an important role in the increased relevance of ethics and compliance programmes in Mexico is the development and widespread deployment of guides, best practices, recommendations, training programmes, certifications, and other tools by international organisations and NGOs, such as the World Bank, the International Chamber of Commerce, and Transparency International, among others.
These efforts have complemented a growing network of Mexican civil society organisations, business associations, and academic institutions that have been at the forefront of emphasising the need for companies to have effective ethics and compliance programmes to fight corruption.
Together, these international and local institutions and organisations have been instrumental in raising awareness about the importance of ethical conduct and compliance and have provided key resources and support to companies looking to implement such programmes. They have also played a key role in advocating for stronger anti-corruption legislation and enforcement.
Increased importance of ESG considerations
The development of ESG (environmental, social and governance) considerations in guiding corporate behaviour has further highlighted the need for effective ethics and compliance programmes. In particular, the governance aspect of ESG emphasises the role of boards of directors and management in ensuring ethical conduct and compliance. Although there has been much discussion about the interplay between ESG and the widely accepted standards for ethics and compliance programmes under international anti-corruption instruments and mature legal frameworks (eg, the US Sentencing Guidelines for Organisations), this is more a matter of complementarity than of friction, and therefore the result will almost certainly be an increase in the amount and complexity of corporate governance implications.
Impact of cross-border transactions and investment
Cross-border transactions and investment by US and other international companies in Mexico have significantly influenced the incorporation of ethics and compliance programmes by Mexican suppliers and other businesses across value chains. These international companies often require their suppliers and partners to adhere to stringent ethical standards and compliance measures, thereby necessitating the implementation of robust programmes and governance practices. Similarly, financial institutions and investors increasingly include governance and compliance criteria in their due diligence before providing financing or capital for projects in Mexico. These factors have led to a ripple effect, with Mexican companies increasingly recognising the importance of having effective ethics and compliance programmes and strong governance structures in maintaining their international partnerships and securing foreign investment.
Conclusion
Companies and their directors and officers cannot ignore the increasing importance of ethics and compliance programmes in Mexico’s legal and corporate governance landscape. From the introduction of corporate criminal and administrative responsibility to the inclusion of corporate ethics and compliance in free trade agreements and the increased application of international anti-corruption instruments, among other matters, effective oversight and control by boards of directors and management is crucial. Furthermore, the potential liabilities for directors, management, and companies arising from the failure to have an effective ethics and compliance programme highlight the need for a robust control environment and solid corporate governance structures. As such, it is incumbent upon companies to ensure that they become aware and take adequate measures to navigate this complex and evolving landscape.
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