LEGAL MATTERS

Basic differences between the
Sociedad Anónima (SA) and the
Sociedad de Responsabilidad Limitada (SRL)
By Lic. Alberto Lazo Corvera • April 2010

I want to start by saying neither one of them is better than the other; however it is important to point out that the structure for the “SA” was created for the big company and the “SRL” for the medium and small companies.

Here are some of the basic differences between the two types of corporate entities:

1. Number of partners. The “SRL” is limited to maximum number of 50 partners; the “SA” may have an unlimited number of shareholders.

2. Initial capital contributions. The initial capital contributions for the “SA” must be for at least $50,000.00; the “SRL” may be incorporated with a minimum capital of $3,000.00.

3. Individuals –vs- Capital. The characteristics and solvency of the individuals forming the company are much more relevant in the “SRL” than in the “SA”. The “SA´s” solvency is determined by its capital stock and not by the qualities or characteristics of the individuals forming the company.

4. Capital contributions. In the “SA”, capital contributions are represented by shares of stock which are by nature negotiable (transferable). In the “SRL”, the contributions of the partners may not be represented (documented) through negotiable instruments; these contributions are divided into Partnership Interests (one for each partner) which may only be transferred after following specific requirements provided by law.

5. Transfer of Partnership Interests and Shares. In a “SRL”, the partners may not transfer their Partnership Interest without prior written consent of the majority of the other partners. In addition, the other partners have the preemptive right to acquire the Partnership Interest to be transferred. On the other hand, in the “SA” the general rule is that the transfer of shares of stock is not limited to any prior authorization, since they are freely transferable; no approval is required for the admission of new shareholders.

6. Additional obligations of the partners. The charter by-laws of the “SRL” may impose additional obligations on the partners so they may be obligated to make additional capital contributions and specific amounts and dates. In the case of the “SA”, it is not possible to impose additional obligations on shareholders, other than their initial capital contributions.

7 . Managementand representation. The “SA” is managed either by a Sole Administrator or by a Board of Directors. The Sole Administrator by law has full power and authority to represent the company in the ordinary course of business; however, if the “SA” is administered by a Board of Directors, only its president has full power and authority to represent the company, and no other Board member may individually represent the company - unless otherwise indicated in the by-laws.

The “SRL” may be administered by one or more managers. When no manager is appointed, all of the partners shall have the authority to manage the company. In the “SRL”, any of the managers may individually represent the company. Even though multiple managers in the “SRL” have to act as a board, any one of them may execute the Board of Managers’ resolutions.

8. Shareholders and partners meetings. In order for the shareholders to hold a meeting, the “SA” must publish a notice of a meeting in a newspaper and/or in the corresponding Official Gazette at least 15 days prior to the meeting; the “SRL” may call for a meeting by certified mail, returned received requested, at least 8 days prior to the meeting.

9. Voting rights. In the “SA”, shareholders have one vote for each share, while in the “SRL”, partners have one vote for each one peso (Mexican currency) contributed. In the “SA”, neither the Sole Administrator nor any other Board Members, nor the Statutory Auditor may represent the shareholder in a shareholder’s meeting; the “SRL” does not have this limitation. In addition, the “SRL” allows voting by mail, in cases contemplated in the charter by-laws of the company.

10. Share s and Special Partnership Interests. The legal structure of the “SRL” is much more flexible for the creation of partnership interests with special rights or limited rights. It is possible to limit voting rights without any restriction. In the “SA”, you may only limit voting rights to specific matters, and only by paying preferential dividends to shareholders holding limited voting shares.

11. Statutory Auditor. In the “SA”, it is mandatory to appoint a Statutory Auditor, who is a corporate official keeping check on the management of the company on behalf of the shareholders. In the “SRL”, the appointment of the Statutory Auditor is not mandatory as -in most cases- the partners are directly involved in the management of the company.

12. Separation of a partner. In the “SRL”, it is possible to terminate the partnership contract
with respect to a partner, thereby excluding him or her from the company; this is not possible in the “SA”.

Robles, Lazo y Gallardo - Law Firm
E-mail: jgallardo@rlg.com.mx

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• Robles, Lazo y Gallardo, S.C. is a Law Firm of specialists in various areas of Law, including Corporate Law, Real Estate, Immigration, Foreign Investment, among others. The Firm is integrated with a group of highly qualified attorneys and has offices in Guadalajara (Privada del Niño No. 676, Fraccionamiento Camino Real, telephone number  33-3121-3010  33-3121-3010 ) and Puerto Vallarta (Carretera a Mismaloya No. 479 interior 107, Edificio Scala. Telephone number  322-223-3218  322-223-3218 ).E-mail: jgallardo@rlg.com.mx

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