MEXICO Law and Practice Contributed by: Roberto Cannizzo, Carlo Cannizzo, Stefano Amato and Mauricio Moreno-Rey, Cannizzo
munities to express objections. Third parties may also challenge the issuance of certain permits through administrative or judicial proceedings. Developers may also be required to enter into agree - ments with public authorities or utility providers to facilitate the development of infrastructure and ser - vices. These agreements may relate to the provision of public services such as electricity, drinking water and sewerage, or to the development of infrastructure such as roads, green areas, urban equipment or treat - ment plants. In some cases, developers construct cer - tain infrastructure and subsequently transfer it to the municipality or to the relevant utility provider, such as the Federal Electricity Commission ( Comisión Federal de Electricidad – CFE). If an authority refuses to grant a permit or issues an adverse administrative decision, the affected party may generally file an administrative appeal for review. In addition, nullity proceedings or constitutional amp - aro actions may be initiated before the relevant courts. Failure to comply with planning, zoning or develop - ment restrictions may result in administrative sanc - tions being imposed by the relevant municipal, state or federal authority. These sanctions may include temporary suspension of the project, cancellation of authorisations, closure of the works, remediation or clean-up measures, fines and, in certain cases, administrative arrest for up to 36 hours. 5. Investment Vehicles 5.1 Types of Entities Available to Investors to Hold Real Estate Assets The most common vehicles for acquiring real estate in Mexico are commercial companies, the most fre - quently used of which are the stock company and the limited liability company (LLC), both of variable capi - tal, and trusts. These are the most widely used forms because they have perfect patrimonial autonomy. The Stock Company The stock company is composed of shareholders whose liabilities are limited to the amount of their contributions. Its capital is represented by negotia -
ble certificates, and it is the only form of corporation whose shares may be traded on the stock exchange. The LLC The LLC is composed of partners whose liabilities are limited to the amount of their contributions. For the transfer of equity and the admission of new partners, the consent of the partners representing the majority of the capital stock is necessary. LLCs are often used by US residents because they might be treated as transparent entities for US tax purposes. The Trust In the case of a trust, the property is owned by the trustee, who is a regulated financial institution. Trusts are commonly used since, in many cases, it is easier to determine the various obligations of the settlors and beneficiaries vis-à-vis shareholders’/partner’s agree - ments, such as contributions by each settlor, reversion of the property if certain conditions are not met, etc. The FIBRA Another vehicle widely used to acquire real estate is the REIT ( Fideicomisos de Infraestructura y Bienes Raíces – FIBRA). See also 5.3 REITs . Other Structures Other structures currently used for these types of transactions include real estate investment companies ( sociedades de inversión en bienes raíces – SIBRAs), development capital certificates ( certificados de capi - tal de desarrollo – CKDs) and investment project fidu - ciary securitisation certificates ( Certificados Bursátiles Fiduciarios de Proyectos de Inversión – CERPIs). 5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity Mexican companies must be incorporated before a notary public or a commercial notary. All of the con - stituent shareholders or partners (a minimum of two), or attorneys-in-fact, must be present upon the incor - poration of the company. For incorporation, it is nec - essary to do the following. • Obtain a permit to use the company’s name: Indicate domicile, purpose, amount of authorised capital and its division into shares (or equity mem - bership).
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