Mexican regulation allows you to carry out business in the national territory via:
Incorporation of a Mexican Commercial Company
These companies, and their corporate regimes, are regulated by the Mexican General Law of Commercial Companies (Ley General de Sociedades Mercantiles, which is referred to as “LGSM”).
- Company in collective name;
- Limited partnership;
- Limited liability company;
- Stock Corporation;
- Partnership limited by shares;
- Cooperative companies; and
- Simplified stock company.
Investors tend to choose to incorporate a Mexican Limited Liability Company or a Stock Corporation as these types of companies adjust better to their needs.
The LGSM, also regulates the modality of “Variable Capital”. All corporate regimes can adopt this modality, and it allows an addition to the capital stock of a “variable part“ which, according to the law and the bylaws of each entity, requires less formalities for its increase or decrease (as it only requires such change to be approved by ordinary meeting) compared to the formalities required for the change of the fixed part of the capital which requires an amendment to the bylaws and may therefore only be resolved and approved by an extraordinary meeting.
Other modalities of the corporate regimes are included into other Laws, for example, an Investment Promotion Stock Corporation or a Public Stock Corporation, which are regulated by the Mexican Securities Market Law (Ley del Mercado de Valores – also referred to as “LMV”).
Opening of a branch
The opening of a branch does not require the incorporation of a new company (“newCo“) in Mexico. Instead, a foreign entity will require authorization from the Foreign Investment authorities to carry out business/commercial transactions in Mexico. This allows investors to have presence in the national territory without the need to open a newCo.
As branches are regulated by the Mexican Foreign Investment Law (Ley de Inversión Extranjera, – referred to as “LIE”), it is required that each new branch needs to obtain authorisation from the Ministry of Economy, which is obtained by submitting the applicable documentation to the Ministry. 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.
Mexican Joint Venture
A Mexican joint venture or association is regulated in Chapter XIII of the LGSM. It This involves an agreement between the parties who agree to provide goods or services and share in the profits and losses of the commercial business or several commercial operations.
As it is an agreement, a Mexican joint venture does not have legal personality, nor does it have a minimum of contributions. It is sufficient that the agreement is in writing and that it stipulates the terms, proportions of interest, and other applicable conditions.
In Mexican joint ventures, there is no legal relationship between the third parties, the partners (who provide the goods and services), and the partner acting on his or her own behalf.
Regarding the ownership of the assets, vis-à-vis third parties, they will be the property of the associate. This means that he/she/it will be able to dispose of or transfer the assets freely, except for those that require additional formalities or that are stipulated in the agreement within the association contract.
For the distribution of profits or losses, the generalities applicable to commercial companies apply, that is, it will be proportional to their contribution and, for the associated partners, the losses that correspond to them may not exceed the value of the goods or services they contributed.
Finally, in the event that the agreement does not stipulate it, the Mexican joint ventures will operate and be liquidated in accordance with the corporate regime of “Company in Collective Name” (Sociedad en Nombre Colectivo), which, broadly speaking, implies that, unless otherwise agreed, the association will automatically be dissolved due to the death, incapacity, exclusion, or retirement of any of the associates.
Individuals
Individuals may be considered as merchants and carry out commercial transactions, requiring their registration as such before the Mexican authorities.