Opening new Business in Mexico

Foreing investment and foreign investor definition

Foreign Investment is:

• Participation by foreign investors in any percentage in the capital stock of Mexican companies;
• Investments by Mexican companies in which foreign capital has majority interest; and
• Participation by foreign investors in activities and acts contemplated by the Foreign Investment Law (FIL).

A foreign investor is:

• An individual or entity of any nationality other than Mexican, and the foreign entities with no legal standing.
• The Foreign Investment Law provides that foreign investment may participate in any proportion in the capital stock of Mexican companies, acquire fixed assets, enter new fields of economic activity or manufacture new product lines, open and operate establishments and expand or relocate existing premises, except as otherwise specifically provided in the law.

Classification of economic activities. Kinds of business corporations

The General Law of Mercantile Corporations (GLMC) acknowledges the following mercantile companies. Article 1 of the GLMC:

• General Partnership
• Limited Partnership
• Limited Liability Corporation
• Corporation
• Limited Liability Partnership
• Cooperatives

Any of these companies can be incorporated as a company with variable capital stock.

In corporations and limited liability corporations, the partners will respond only to the extent of their contributions. There are other mixed liability companies, such as limited partnerships and limited liability partnerships, where some members are liable without limitations for the company's obligations and others are only to the extent of their contributions.

Companies will be incorporated in the presence of a notary and the amendments to the by laws shall also be recorded. The notary public does not authorize the deed when the by laws or the amendments thereto contravene the provisions of the General Law of Mercantile Corporations.

The General Law of Mercantile Corporations acknowledges legal standing of foreign mercantile corporations that are duly incorporated.

Foreign companies can only carry out business in Mexico upon registration in the Public Registry of Commerce, which registration shall take place prior authorization of the Ministry of Economy pursuant to Articles 17 and 17a; of the Foreign Investment Law.

Property and Commerce Public Registry, Commercial Notary and Notary Public

Property and Commerce Public Registry (PCPR)

The PCPR is a public institution that guarantees certainty, juridical security and protection to the property, its transmission, obligations and the effects of the inscribed rights, as well as the juridical acts carried out by individuals and legal entities.

A simple or certified copy of the registry of the property to be alienated or a certificate of the obligations of the real estate located in the Mexican republic, can be obtained in the PCPR; the registry offers the service to know who is the proprietor of the real estate to be purchased or for sale, and to know if a society or association (legal entity) is duly recorded in the Public Registry.

The main procedures and services that the PCPR carries out in the purchase and sale of real estate are:

• Certificate of Existence or nonexistence of Obligations.
• Certificate of registration of the Accountants Registers in book or folio.
• Certificate of non-registration.
• Certificate of acquisition or alienation of real estate (not property).
• Acts and Juridical Facts Registration.

The PCPR is an institution subject to each State of the Mexican Republic responsible of providing security and publicity to certain juridical acts implicating real estate or business corporations.

Commercial Notary

A commercial notary is a private individual, legal expert, specialized in commercial and economic-financial matters, who has been entrusted by the Mexican Government to act as a mediating agent, appraiser, legal advisor, arbitrator, public attester and other activities indicated by the Federal Law on Commercial Notaries and other laws and regulations, through the corresponding entitlement issued by the Federal Executive through the Ministry of Economy.

According to Article 6 of the Federal Law on Commercial Notaries, a commercial notary shall have the following authority:

1. To act as a mediating agent, for the transmission and exchange of proposals between two or more parties, and for advising in the execution or adjustment of any contract or agreement that has a commercial nature.

When acting as a mediating agent, he/she acts in the transmission and exchange of proposals between two or more parties regarding any good or service that is offered in the national or international market, and he/she advises on the execution or adjustment of any contract or agreement that has a commercial nature.

The Commercial Notary offers security, trustworthiness, efficiency and expediency to his/her contributions, since he is a qualified market technician, and not just a simple intermediary; rather an expert mediator, honest and impartial that causes contact and adjusts commercial contracting in general, whether for goods or services. As a mediating agent, the Commercial Notary is obligated to propose business with accuracy, clarity and precision, maintaining professional secrecy in not revealing, as long as the commercial transaction has not concluded, the names of the contracting parties nor the data or reports on the transaction, unless the law or the nature of the transaction demands otherwise or the parties have agreed to such revelation.

2. To act as an expert appraiser for the estimation, quantification and valuation of goods, services, rights and obligations that are submitted to his/her consideration, either through a private mandate, or as a result of an order issued by a competent authority.

As an expert appraiser he estimates, quantifies and valuates the goods, services, rights and obligations that are submitted to his/her consideration, either through a private mandate, or as a result of an order issued by a competent authority.

The Commercial Notary is legally authorized to valuate within judicial proceedings or otherwise, including the following goods and services:

a. Physical goods, such as jewelry and objects of art.

b. Companies as whole for the purpose of strategic alliances conducted via mergers, acquisitions, associations, joint ventures, etc.

c. Tangible assets: a) real estate, such as land and constructions: residential real estate, warehouses, industrial real estate, special facilities, etc.; b) moveable goods, such as shares, equity interests, industrial, commercial and services machinery and equipment and their accessories, automobiles, airplanes, vessels, etc.

d. Intangible assets, such as copyrights, royalties, trademarks, trade names, authorizations for use, commercial notices and origin rights, franchises, commercial credits, credit rights, assessment of damages and loss of profits for judicial purposes, etc.

Appraisals conducted by a Commercial Notary shall have full legal evidentiary value for commercial and tax purposes.

The Commercial Notary, in his/her capacity of just appraiser of goods, services, rights and obligations, issues expert opinions. Depending on the expert opinion to be rendered, or of the objectives or purposes for which it is to be prepared, all appraisal necessarily requires the expert choice of valuation method, which shall be adjusted to the techniques regarding valuation practice that are deemed acceptable. This provides great reliability and impartiality in such appraisals and is precisely what justifies and validates the performance of the Commercial Notary as an expert appraiser, while serving as a basis for the expert opinions rendered by him/her.

3. To provide legal advice to merchants or businessmen in activities that are inherent to trade.

In his/her capacity as a legal adviser, he/she provides legal advice to all kinds of companies, commercial entities and individuals who undertake entrepreneurial activities.

The Commercial Notary is a reliable and impartial adviser, with vast legal knowledge who exercises control over the legality of businesses.

4. To act as an arbitrator, upon request by the parties, in the resolution of disputes derived from acts, contracts and agreements that are commercial in nature, as well as regarding those that result between suppliers and consumers pursuant to the relevant law.

As an arbitrator, he/she acts upon request by the parties, in the resolution of disputes derived from commercial acts, contracts and agreements that are national or international in nature, as well as regarding those that result between suppliers and consumers pursuant to the Federal Consumer Protection Law.

Currently, the National Copyright Institute and the Federal Consumer Protection Agency include Commercial Notaries interested in acting as arbitrators within their lists of independent arbitrators.

In arbitration, as in judicial proceedings, a judgment is rendered on the application of the legal applicable provisions to the specific situation that is resolved. The Commercial Notary in his/her capacity of arbitrator, issues arbitral awards.

5. To act as a public attester in order to evidence contracts, agreements and acts that are commercial in nature, except in the case of real estate, as well as for the issuance of debentures and other securities; as regards mortgages on ships, vessels and aircraft that are executed before him/her; as well as to attest to facts that are commercial in nature.

As a public attester, he/she issues policies (polizas) and deeds that are public instruments that have full evidentiary value pursuant to applicable law. Part of the legal security provided by the Commercial Notary is his obligation to maintain his/her own public instruments and to that effect, he/she must daily create a file of all policies and deeds, which shall be dated and chronologically numbered; and in that same order, he/she shall insert a summary thereof in the special ledgers maintained to that effect, providing the greatest legal security.

In his capacity of commercial public attester, the Commercial Notary has the following characteristics:

a. Provides legal certainty of a specific date to the execution of a business.

b. Has the obligation of verifying the identity and legal capacity of the parties participating in a business, as well as giving advice and explanation on the legal consequences of the acts they are involved in.

c. Is responsible for his/her participation in a legal action the purpose of which is physically or legally impossible, or contrary to law or good customs.

d. Issues a public document that has an assumption of validity and, in some cases, becomes an executive instrument. Since it is a public document, it is an instrument that may be recorded with the Public Registry, and the business provided thereby may be used as evidence against third parties.

The current activities of a Commercial Notary (mediating agent, expert appraiser, legal advisor, arbitrator and public attester) make him/her a useful and practical legal concept which enables expeditiousness to trade and aids merchants and entrepreneurs, providing them legal security for their operations, quickly and at the less possible cost.

6. To act as an attester in the incorporation and other acts provided by the General Law on Business Corporations (Ley General de Sociedades Mercantiles), including those that evidence the authority of those appointed to corporate office.

7. Compare and certify copies of the policies and deeds that were issued by them, as well as those documents seen by them, provided they are among those referred to by Articles 33 to 50 of the Commercial Code, and

8. Any other tasks provided by other laws and regulations.

The foregoing tasks are indicated without prejudice of the provisions of any other laws, and shall not be deemed exclusive to commercial notaries.

Only the persons entitled as such by the Ministry of Economy may represent themselves as commercial notaries.

Notary Public

The Mexican Notary Public is a specialized attorney with advanced legal knowledge, who participates in commercial and civil matters as a public attester and legal adviser to investors, entrepreneurs and individuals.

In Mexico, acts that are executed before the presence and under the advice of a Notary Public have full evidentiary value in all courts around the country, and are an absolute guarantee of legality and legal certainty.

The Notary Public is a legal professional, who undertakes public tasks within the framework of non-contentious activities initiated by the State, and he/she performs numerous social tasks within the scope of Mexico's national society, and to this extent he/she is a public official and autonomous delegate of State's public authority.

The public and societal tasks of the Notary Public are, to a very special extent, at the disposal of respect and safeguard of legality and maintenance of legal security and equity.

The Notary Public performs his/her tasks by establishing authentic acts that have evidentiary and executive force, through the rendering on the one hand, of full legal consulting and assistance services to citizens. These activities are intimately linked to authentication duties, as well as the performance of judicial acts within the confines of voluntary jurisdiction proceedings, through which the Notary public contributes to expediting the judicial powers of the State.

The Notary Public exercises his/her public tasks impartially, maintaining professional secrecy as well as substantial, economic and personal independence within the framework of a liberal profession specifically governed, thereby providing specific contribution to consumer protection.

The Notary Public, due to the territorial organization of his/her profession within the framework of its competence, guarantees legal assistance in favor of citizens within an entire sub-federal territory.

The Notary Public is subject to regular and severe control in connection with all of his/her activities and tasks by the National Association of Notaries Public and by the Colleges of Notaries of the states, as well as by the State itself, and, therefore, he/she ensures the personal responsibility of his/her activities and tasks.

In sum, the Notary Public provides certainty and security, and is a qualified legal adviser, who impartially advises and guides the interested parties, suggests the ideal legal tools, so that through the execution of the suitable legal act, they may be able to govern their rights and legal events in general; he/she inserts such events in a document authored by him/her. Once it has been signed by the relevant person, it is authenticated by him/her as a continuous act so that he/she may provide authentic evidence of its execution. Besides, the notary public is an officer that is vested with public faith so that the documents authorized by him/her and the copies and reproductions issued have full evidentiary value in court and out of court, and, consequently, that its content be deemed as good and valid by all the persons involved or related to the effects of the acts or facts attested in such documents, and in general, by the entire community, notwithstanding the fact that is has no evidence of the provisions thereof, since this is the legal quality of public faith.

When doing business in Mexico, your assets will be legally backed if before entering into an agreement or conducting an investment, you consult directly a Notary Public, who will consult with the College of Notaries of the relevant city or state.

Agreements executed before Notaries are provided with a guarantee of legal certainty that is granted by the Mexican Government in favor of those who request its services.

The Notary Public shall intervene in:

• Real estate purchases and sales.
• Incorporation of companies.
• Incorporation of companies.
• Granting of powers of attorney.
• Purchase and shares of companies.
• Trusts in beaches and borders.
• Wills and inheritances
• Financial and credit operations
• Civil and commercial arbitration, etc.