MEXICO Law and Practice Contributed by: Fernando Hernández G., Elvia Ríos Saldaña, Ana Karen Inzunza Sánchez and Luis Andrés Estrada Intriago, Vázquez Aldana, Hernández Gómez & Associates (VAHG)
particular circumstances that may lead to significant decision-making. In the event of a breach, liability may be incurred by the directors in favour of the company. On this basis, it is expected that directors perform their duties in compliance with the standards set out in 3.6 Legal Duties of Directors/Officers . In the case of publicly traded companies (S.A.B.), directors must act in the interests of the company as well as those of minority shareholders. Accordingly, their actions are subject to a higher level of scrutiny, taking into account various internal control mecha - nisms as well as the role of specialised committees acting as auxiliary bodies. 3.8 Breach of Directors’ Duties In accordance with Mexican corporate law, compli - ance with directors’ obligations is enforceable by the company through the shareholders’ meeting, by means of the corresponding corporate resolutions. Additionally, shareholders representing at least 25% of the share capital may bring a civil liability action directly against members of the board of directors, as set out in 4.4 Shareholder Claims . In the case of publicly traded companies (S.A.B.), in addition to the mechanisms described above, the authorities responsible for overseeing their proper operation may intervene in the event of non-com - pliance with applicable obligations, with a view to protecting investors. As a general matter, a failure to comply with the duties of the board of directors may give rise to civil liability of its members vis-à-vis the company, administrative sanctions and, in certain cases, criminal liability where provided for under appli - cable law. 3.9 Other Claims/Enforcement Against Directors/Officers In addition to the civil liability action referred to in 4.4 Shareholder Claims , Mexican law provides various grounds to enforce compliance and liability against members of the board of directors and officers of the company in matters of corporate governance. These include individual actions brought by shareholders where they suffer direct damages, as well as claims
arising from breaches of the by-laws, shareholders’ agreements or other applicable contractual arrange - ments. Directors are liable to the company for breaches of the obligations inherent to their positions, including those related to capital contributions, compliance with applicable provisions governing the distribution of dividends, and the implementation of resolutions adopted by the shareholders’ meeting. In such cases, liability may arise jointly and severally among those directors who participated in, or were aware of, the relevant irregularity, in line with the duties set out in 3.6 Legal Duties of Directors/Officers . In this context, members of the board of directors or officers may also incur liability for acts or omissions of prior management bodies where, having knowledge thereof, they fail to disclose such matters to the com - pany. In the case of publicly traded companies (S.A.B.), the applicable regime is more stringent. As noted in 3.7 Responsibility/Accountability of Directors , breaches relating to disclosure obligations, corporate govern - ance or investor protection are more likely to result in liability to the company, as well as administrative sanctions imposed by the competent authorities. With respect to S.A.P.I, while there is greater flexibility in their internal regulation, members of the board of directors remain subject to duties and liabilities aris - ing from the improper performance of their functions. As regards limitations of liability, Mexican law does not provide for a complete waiver of liability for directors or officers in respect of the legal duties inherent to their positions. In practice, however, certain mecha - nisms are commonly adopted to delineate such liabil - ity, including the limitation of powers in the by-laws or shareholders’ agreements, and, in some cases, the procurement of directors’ and officers’ liability insur - ance (D&O insurance). Such mechanisms will not apply in cases where direc - tors or officers are guilty of wilful misconduct, bad faith or in situations involving a conflict of interest. In this regard, however, directors or officers who are not
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