MEXICO Law and Practice Contributed by: Javier Díaz de León, Monica Ramos and Martín Cortina, Díaz de León Abogados
6. Roles and Responsibilities of Fiduciaries 6.1 Prevalence of Corporate Fiduciaries Corporate fiduciaries are recognised by the Mexican Corporations Law, the Securities Market Law, the Securities and Credit Operations Law, and the Fed - eral Civil Code. Specifically, the directors of Mexican private and public companies must observe a “duty of care” and “duty of loyalty” in their administration activities. In the case of trusts, the Mexican trustee must conduct their role with high diligence in the administration and operation of the trust assets. Pro - fessionals rendering services to family-owned busi - nesses including companies, trusts and foundations must also observe diligence in their advice in order to be excluded from potential liability or contractual negligence. 6.2 Fiduciary Liabilities Fiduciaries may be directly liable in connection with their management actions in trusts, foundations and entities. Piercing of the corporate veil has been dis - cussed by the Mexican Supreme Court with respect to Mexican entities rather than trusts or foundations. Specifically, the Supreme Court stated that the cor - porate veil may be pierced in the following situations: (i) when there is an abusive exercise of a recognised right (such as the freedom of association) in fraud of third parties, and (ii) in those circumstances where the principle of good faith is infringed by a simulated act (sham transactions). There are analogous effects to piercing of the cor - porate veil under the joint liability concept attributed to directors and shareholders of companies in cases involving irregular entities, companies with tax defi - ciencies or labour claims from employees, among others. 6.3 Fiduciary Regulation Fiduciaries are required to invest assets prudently in the case of Mexican trusts. They must use a level of diligence like a “father of family”. For Mexican compa - nies, shareholders and directors may not have inter - ests opposed to the companies. The investment of assets must be always conducted in the best profita - ble interest of the companies, trusts and foundations,
to discuss their controversies under private dispute mechanisms. In the case of international structures such as foreign holding companies, joint ventures or international trusts, private clients prefer the adoption of foreign law and courts for potential litigation and controversies. 5.2 Mechanism for Compensation Under Mexico’s legal system, the parties may adopt conventional penalty ( pena convencional ) as a valid indemnity for events of default or breach of covenants involving trusts, foundations, insurance programmes and similar instruments. Contractual damages may be claimed directly by the indemnified party without being required to go to the competent courts unless other - wise agreed by the written agreement. In the case of negligence, the damages suffered by the indemnified party may be also quantified by an independent expert whether in a private mediation, a judicial procedure or by arbitration. The conventional penalty may not exceed the value or the amount of the principal obligation set forth in the applicable contract. The indemnified party needs to choose between the fulfilment of the original obliga - tion or the payment of the conventional penalty. The conventional penalty is generally claimed in substitu - tion of damages and losses ( daños y perjuicios ), since the Federal Civil Code does not allow the simultane- ous claim of conventional penalty added to damages and losses. In turn, damages and losses entitle the injured party to be restored to the economic position it would have occupied had the breach not occurred, or to receive monetary compensation therefor. Such compensation is generally quantified on the basis of the actual losses suffered and the profits or income that the aggrieved party failed to obtain as a consequence of the breach - ing party’s non-performance of its contractual obliga - tions.
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