MEXICO Law and Practice Contributed by: Melissa Franco and Mauricio Oropeza, Deloitte Impuestos y Servicios Legales, S.C.
1. Legal System and Regulatory Framework 1.1 Legal System Mexican law is based on civil law, which derives from Roman law. The Political Constitution of the United Mexican States ( Constitución Política de los Estados Unidos Mexica- nos , or CPEUM) has established a regime in which the power to regulate matters that are not expressly under federal jurisdiction will be reserved for the local/state level, in accordance with the principle of the distribu - tion of powers. 1.2 Regulatory Framework for FDI Mexican law provides two options for FDI: • opening a permanent establishment (PE); or • opening a Mexican subsidiary. For the PE, as branches are regulated by the Mexican Foreign Investment Law ( Ley de Inversión Extranjera , or LIE), each new branch needs to obtain authorisation from the Ministry of Economy, which is achieved by submitting the applicable documentation to the Min - istry. An alternative and simplified process may apply if there is an international or bilateral treaty between Mexico and the country of origin of the investment. Regardless of the option chosen for the FDI, several industries are reserved for Mexicans or Mexican com - panies through a foreign exclusion clause, and some have a maximum participation percentage according to the LIE, such as transportation, broadcasting and newspapers, among others. In the latter industries, foreign investors can request authorisation for a “neu - tral investment”. 2. Recent Developments and Market Trends 2.1 Current Economic, Political and Business Climate Mexico currently has a predominantly left-centre lean - ing government. However, one of the government’s commitments at the beginning of its six-year term was
the development and promotion of foreign investment. In this sense, no amends to the LIE are expected.
3. Mergers and Acquisitions 3.1 Transaction Structures The main methods used for M&A transactions in Mex - ico are as follows. Acquisition of Companies For the acquisition of a Mexican company, foreign investors can opt to purchase the majority or minor - ity shareholding, considering that all Mexican entities must have, at all times, a minimum of two partners or shareholders. There is only one corporate regime regulated within the Mexican General Law of Commercial Companies ( Ley General de Sociedades Mercantiles , or LGSM) that allows individuals that do not hold control of other entities but do have a Mexican electronic signature – which means that they are tax residents in Mexico – to incorporate an entity with a sole shareholder (simpli - fied stock company). For the acquisition of a shareholding in Mexico, the LGSM provides for the following requirements: • if applicable, authorisation from the board of direc - tors for the transfer, according to the by-laws of the company; • holding a shareholders’ or partners’ meeting to approve such transfer; • proceeding with the applicable annotation within the Shareholders’ or partners’ ledger; • filing the applicable notices, such as with the Ministry of Economy through the Corporations Portal ( Portal de Sociedades Mercantiles , or PSM), the National Foreign Investment Registry ( Registro Nacional de Inversiones Extranjeras , or RNIE) and the tax authorities; and • issuing the shares, for stock companies. It is important to consider that the meeting required for the transfer is ordinary, unless otherwise provided for by the by-laws of the Mexican company. In this sense, the voting and installation quorums required for the
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