Photo credit: Capital by Simon Cunningham

Last December 15, 2011, Mr. Calderon Administration published a package of amendments for promoting investment and cutting the red tape for incorporating and operating commercial companies in Mexico, including to the General Law of Commercial Companies (GLCC).

One of the Amendments removes the minimum capital stock for corporate forms of Sociedad Anómima (SA, similar to a Corporation) and Sociedad de Responsabilidad Limitada (SRL, similar to a LLC). Previously, there was a minimum capital stock of $4,000 USD for SAs and $250 US for SRLs.

This might seem a little change into red tape, but SAs and SRLs are the most used corporate forms in Mexico (No other commercial corporate forms were amended).

Considering that stockholders are liable up to the value of capital stock, this amendment affects companies doing business in Mexico in several levels. Here are some:

1. At time of contracting and during performance of contracts, it would be necessary that companies present evidence that capital stock covers all obligations under contracts and/or it has not maliciously reduced to $1 MXN.
2. Legal representatives acting on behalf of their companies, need to be sure that company has enough capital stock to cover corporate obligations she/he is engaging into. Otherwise, she/he  could be involved in a litigation.
3. From now on, corporate books should be updated right after a capital stock increase happens. This is to prevent misrepresentations at time of contracting.
4.  GLCC still provides that companies that have lost 2/3 of their capital stock will be dissolved and liquidated. Any third party with interest may file for that before Court. So setting a low capital stock is not a good idea anyway.
5. Minimum amounts of capital stock still apply for companies procuring Government, since each bidding process has capital stock requirements specific for such contracts.

SAs and SRLs had accessible capital amounts for setting business ($4,000 USD and $250 USD). This amendment solved a problem that never existed.

It would have been more interesting if House of Representatives approved Sole Proprietorship companies. A bill that was discussed along with these Amendments but failed to pass through.

So, if you are about to engage in a commercial relation, the best advice is to find an experienced contract lawyer to protect the deal.

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