MEXICO Law and Practice Contributed by: Allan Kaye Trueba, Rebeca Sánchez and Mariana Santillán, Aziz & Kaye Business Law
In the case of corporate JVs, mandatory matters pro - vided by applicable laws like the General Business Companies Law must be governed by such law, and cannot be derogated by contract, even if a sharehold - ers’ agreement or JV contract is governed by foreign law. Such is also the case in agreements governing real estate matters in Mexico. The Federal Civil Code’s conflict-of-laws rule rec - ognises the parties’ autonomy to choose a foreign law for contractual obligations that are not caught by mandatory Mexican law, provided the choice does not contravene public policy. This enables parties to subject the shareholders’ agreement, JV contract, or related agreements to a neutral law that offers greater predictability. Mexico is a party to the Hague Choice-of-Court Con - vention, allowing recognition of designated-court judgments; however, enforcement in Mexico will require an exequatur proceeding, so investors gener - ally prefer arbitration as a faster process. Other inter - national treaties signed by Mexico regarding interna - tional disputes include the New York Convention of 1958 and the Panama Convention of 1975. If no dispute-resolution clause is inserted, jurisdiction defaults to Mexican courts under Mexican procedural law, with the venue determined by the defendant’s domicile. Mexico’s legislation on alternative dispute resolution (ADR) mechanisms encourages mediation and concili - ation, but there is no general obligation for commercial JV parties to try ADR before suing or arbitrating.
appoint at least one director, when the board is comprised of three or more members. • SAPI – every individual shareholder or group of shareholders with voting rights (including limited or restricted voting rights) may appoint one director for every 10% of stock ownership. • SAB and SAPIB – the board of directors should have a maximum of 21 members, of which at least 25% should be independent. • Limited liability companies – directors in limited liability companies are called managers. There are no specific rules or considerations applicable to the appointment of managers. If no managers are appointed, all the partners will participate in the management of the company. Weighted voting in the board of directors is not rec - ognised in Mexico. 7.2 Duties and Functions of JV Boards and Directors In Mexico, the board of directors oversees the admin - istration of the company. In general, the aim of the board of directors is to protect the interests of the company. Therefore, the board of directors has fiduciary duties to the company; namely, loyalty and diligence duties in publicly listed companies. Regardless of any competing duty that the director may have to the JV participant that appointed them, the director shall not act when there is a conflict of interest. See 7.3 Conflicts of Interest . Directors are joint obligors with the company in the following matters: • the veracity of shareholders’ or partners’ contribu - tions; • compliance with legal and by-law requirements regarding profit sharing; • existence and upkeep of accounting, record and information keeping as required by law; • exact compliance with the resolutions of the part - ners’ meetings; and • maintenance of the legal reserve.
7. The JV Board 7.1 Board Structure
The structure of the board of directors in a corporate JV is a matter of negotiation between the parties and shall be included in the by-laws or partners’ agree - ment; however, specific rules may apply depending on the entity type chosen by the partners: • Corporation – minority shareholders representing at least 25% of the capital stock have the right to
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