MEXICO Law and Practice Contributed by: Allan Kaye Trueba, Rebeca Sánchez and Mariana Santillán, Aziz & Kaye Business Law
6.2 Governance and Decision-Making Decision-making in the JV entity must be clearly defined in the JV document; either in the contractual arrangement for a contractual JV or in the by-laws for a corporate JV (see 2.1 Typical JV Structures ). In Mexico, corporate JVs follow the rules of the cho - sen company type, with the shareholders’ or partners’ meeting as the ultimate governing body responsible for key decisions (eg, balance sheet approval, direc - tor appointments, profit distribution, by-law amend - ments, capital changes, and dissolution). These meetings generally operate by simple major - ity unless higher thresholds are required by law or by-laws, and additional reserved matters or special voting requirements can be included in the by-laws. Operational decisions are typically made by the board of directors, also by simple majority unless otherwise specified. Contractual JVs offer flexibility in designing decision- making rules, such as assigning differentiated roles, specifying voting thresholds for certain issues, and determining decision-making rights based on contri - butions. It is essential to clearly allocate decision-making authority, quorum and voting requirements, and dead - lock provisions in the JV documents (see 6.4 Dead- locks for more information). In a corporate JV, funding is typically accomplished through equity contributions, though debt or a mix of both may also be used. Initial equity commitments are often modest, with further funding provided as needed by JV members or third parties, either upon creation, according to a funding schedule, or via capital call mechanisms. To ensure financial certainty, budgets or maximum call amounts are usually set, and capital call provisions may include measures to prevent dilution or unwant - ed changes in ownership, such as unpaid subscribed shares, subscription premiums, or special rights. 6.3 Funding Corporate JV
Corporate JV In a corporate JV, the main documents are the com - pany’s by-laws and, often, a shareholders’ or partners’ agreement. These typically address: • major decisions (requiring unanimous or qualified majority approval, such as amending by-laws, dis - solving the company, or altering dividend policy); • share or equity transfer restrictions (preemptive rights, drag-along, and tag-along); • change of control (preventing indirect ownership transfers); • deadlock and buy/sell mechanisms (procedures for resolving impasses and exit strategies); • board and committee appointments (including independent directors and committees modelled after public companies); • funding commitments (future capital contributions, funding calendars, or milestones); • dividend policy; • non-compete obligations (including post-exit terms); • confidentiality (surviving a party’s exit); • intellectual property (ownership or licensing, see 8.2 Licensing v Assignment of IP Rights ); • related-party transactions (approval processes); • exclusivity and territory (operating area and exclu - sivity rules); and • dispute resolution (choice of law, venue, and arbi - tration options). Contractual JV In a contractual JV, the collaboration or co-investment agreement will include similar provisions: • key decision-making processes; • deadlock resolution; • funding commitments; • allocation of expenses and income;
• non-compete obligations; • related-party transactions; • exclusivity and territory; • intellectual property rights; and • dispute resolution mechanisms.
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