LEGAL MATTERS

Foreign investment in Mexican corporations
By Robles, Lazo y Gallardo Law Firm & May 2010

Nowadays, it has become very usual for foreign investors to operate their business through Mexican corporations, such as Sociedad Anónima or Sociedad de Responsabilidad Limitada (Mexican equivalent or similar to US Corporation and LLC, respectively). These legal entities are subject to a special treatment according to applicable Mexican laws, thus making it relevant to examine the limits and obligations on this matter.

Activities restricted to foreign investment
in Mexican corporations
For purposes of this article, we will only mention the activities reserved to Mexicans, those with a certain foreign investment allowance, and those which require a previous authorization to increase the permitted percentage of foreign stock. Within the activities reserved to Mexicans are: services on passenger, tourism and goods ground transportation (excluding courier services); fuel retail trade; television and radio services; development banking institutions and certain professional services.

Activities restricted to the foreign investment are: cooperative companies up to 10%; air transport services up to 25%; and services regarding insurance and bonding companies, as well as money exchange institutions are up to 49%. Though there is no other regulation for the rest of the activities (excluding services reserved to the Mexican government), nevertheless, services related to education, legal advisory services, insurance agents, and cellular phone services require a previous authorization to increase the percentage to more than 49%.

National Registry of Foreign Investment (“RNIE”)
According to Mexican regulations, all Mexican companies with foreign investment must request the registry of the company in this recording office, notwithstanding the activities or services they offer to others.

When does the corporation request the registry?
The corporation must file for its registration within 40 business days from the day in which the corporation receives foreign investment. In other words, such term is counted from the date of incorporation of the company, if the foreign investment is included, or from the date of a shareholders meeting increasing the capital stock of the corporation or any other act that reflects the incorporation of the foreign investment into its capital stock. 

Is the registry the only obligation of the corporation?
The answer is no. Corporations are constrained by law to notify RNIE of changes in their taxpayers’ registered address, the admission or resignation of partners or shareholders, variation in the capital stock, and change of the legal representative of the corporation, just to mention just the most important ones. Every year, it needs to submit an economic report containing accounting balance and financial statements. Such report should be submitted according to the first letter of the corporation’s name. This means that those corporations whose names start with the letters A to D, must file in April; from E to J in May; from K to P in June; and Q to Z in July.

Foreigners acting as Attorneys-in-fact or legal representatives of the Mexican corporations
Whenever a foreigner is designated as attorney-in-fact or in any way legal representative of a Mexican corporation, the designation is subject to previous authorization by the Immigration Office. The attorney-in-fact must obtain an FM3 authorizing the foreigner to exercise his faculties as representative of the corporation within the Mexican territory, as an Executive Officer. In case the foreigner already has a current FM3, he only needs to apply for an extension of activities to practice his duty as representative of the corporation.

Indeed, these are just a few matters to consider before running a business through a Mexican corporation. Questions of tax implications and other matters will be discussed in further articles.  Email to a friend

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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