MEXICO Law and Practice Contributed by: Eduardo Triulzi, Eric Silberstein and Ana Jáuregui, Ritch Mueller
3.3 Investment Structure Preferred shares grant the corresponding share - holder preferred rights, which may include pre - ferred dividends, a certain number of board seats, anti-dilution protections, and a liquidity or liquidation preference. A complementary or alternative structure is venture debt, which is expected to grow during 2025, providing flex - ible capital structures less dilutive to founders. 3.4 Documentation The typical key documents comprising a financ - ing round in a growth company in Mexico are a subscription agreement and a shareholders’ agreement (which are incorporated into the by- laws of the company), together with the ancil - lary documents related thereto, such as share - holder resolutions and other closing corporate documents. Simple agreements for future equity (SAFEs) are commonly used in the USA but lack certain terms and conditions, which may prevent investors subscribing and paying for the corre - sponding shares. As opposed to the USA, where existing tem - plates from the National Venture Capital Asso - ciation are available, there are no templates that the market relies upon in Mexico. However, there are certain US practices that have been taken into consideration and imported and tailored to Mexico. 3.5 Investor Safeguards Venture capital investors are typically able to include weighted average (as opposed to full ratchet) anti-dilution provisions, liquidation pref - erence provisions and pre-emptive rights for the subscription of new shares. Anti-dilution and liquidation preference provisions are generally effective for a certain period of time. Pre-emp - tive rights are typically granted to all investors, including founders, but excluding employees.
a positive social, technological and environ - mental impact upon its investments, whereas funds-of-funds hold the dual mandate of gener - ating attractive risk-adjusted returns while pro - moting the private equity ecosystem in Mexico. As of October 2024, Mexico was home to nine unicorns (Kavak, Bitso, Clip, Confio, Merama, Incode, Clara, Nowports and Stori), with Plata joining the ranks as the tenth unicorn in March 2025. The growing number of high-value start- ups signals a shift in the Mexican economy, positioning the country as a rising player in the global venture capital ecosystem. 3. Investments in Venture Capital Portfolio Companies 3.1 Due Diligence In-depth due diligence usually focuses on corpo - rate, material contracts, IP, employment matters, tax, litigation, and regulatory matters. Generally, counsel is asked to provide a report on red flags only, limited to identifying material contingencies A new financing round would generally take between one and two months as of the date legal and tax due diligence begins. Negotiations of the term sheet and commercial due diligence are carried out before legal and tax due diligence begins, and the investment agreements are negotiated while the legal and tax due diligence is being carried out. Venture capital counsel will take the lead in preparing the investment agree - ments; if more than one venture capital fund is participating in the financing round, the leading venture capital fund will take the lead in negotiat - ing the agreements, but all of the venture capi - tal funds participating in the financing round will have to agree upon the agreements. of the target. 3.2 Process
366 CHAMBERS.COM
Powered by FlippingBook