MEXICO Law and Practice Contributed by: Allan Kaye Trueba, Rebeca Sánchez and Mariana Santillán, Aziz & Kaye Business Law
Promotion investment corporation (SAPI) Promotion investment corporations blend features of traditional corporations with enhanced flexibility for investors. They offer greater leeway in shareholding agreements and foster stronger corporate governance standards. Compared to regular corporations, SAPIs typically offer lower thresholds for minority rights, are allowed to acquire their own shares and to restrict profit-shar - ing with shareholders. Limited liability company Limited liability companies ( sociedades de responsa- bilidad limitada ) can have up to 50 partners. Partner approval is required for admitting new members or transferring equity holdings, except in certain cases, such as inheritance. This type of entity often appeals to US investors due to potential pass-through tax treatment. 2.2 Strategic Drivers for JV Structuring Choosing the appropriate JV vehicle involves analys - ing several factors, including the following. Tax Strategy Tax consequences often play a decisive role in the choice between setting up a contractual JV or a cor - porate JV. Key considerations include: • the potential addition of an extra taxable layer or level when incorporating a corporate JV; • the possibility that tax authorities may consider (and, therefore, tax) a contractual JV as an implied corporate JV, even without formal incorporation; and • the overall feasibility and profitability of the project after accounting for tax effects. It is crucial to have tax experts review any proposed JV structure to assess its implications for all parties involved. Long-Term Vision The intended duration and depth of the partnership significantly influence the choice of JV vehicle:
despite ongoing legislative proposals in the Mexican Congress.
2. JV Structure and Strategy 2.1 Typical JV Structures
JVs in Mexico are typically established through one of two main structures: a contractual arrangement (con - tractual JV) or a company (corporate JV). The choice between these alternatives depends on various factors, which are discussed in 2.2 Strategic Drivers for JV Structuring . Contractual JV In a contractual JV, parties pool their efforts and resources through a formal agreement. This can take the form of a collaboration, co-investment, profit- sharing, trust or any other type of agreement that outlines each party’s responsibilities, benefits, and contributions to the project. For more information on the content of these docu - ments, see 6.1 Drafting and Structure of the Agree- ment . Corporate JV The parties may choose to become partners or share - holders in a dedicated legal entity. In this case, the rights and obligations of the parties are typically defined in the by-laws of the corporate JV and in a separate shareholders’ or partners’ agreement. The most common types of entities used as corporate JVs in Mexico are outlined below. Corporation In corporations ( sociedades anonimas , or SAs), shareholder liability is limited to their share value, and ownership is represented by freely transferable share certificates. Publicly traded corporations can be structured as either stock corporations (SAB) or stock promotion investment corporations (SAPIB), subject to additional regulations.
110 CHAMBERS.COM
Powered by FlippingBook