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Wednesday, April 27, 2016

Single Member Entities in Mexico?

Yes! Mexico finally amended its Business Entities Code (Ley General de Sociedades Mercantiles) to create the Simplified Stock Corporation. The decree was published in the Federal Official Gazette. 
In a nutshell, the Simplified Stock Corporation:

Can have one or more shareholders, whose liability is limited to the amount of their capital contributions;

- Reduces formation costs from at least 6 days to 24 hours;

- Eliminates formation costs, which currently exceed $20K pesos;

- Eliminates the use of notaries by allowing individuals to incorporate by submitting an online application;

- Eliminates the need of personalized bylaws; and

- Will only require, for formation purposes, (a) the agreement of the shareholder or shareholders to form a simplified stock corporation and adopt the bylaws provided by the Ministry of the Economy, (b) the Ministry of the Economy’s use of name authorization, and (c) the shareholder or shareholders electronic signature.

Never before had there been a simpler, cheaper and faster way to form a legal entity in Mexico.  This type of entity, however, is not for everyone.  For instance, (a) no shareholder can be a controlling member of any other corporation or business entity, (b) the Simplified Stock Corporation cannot have annual revenues in excess of $5MM pesos; (c) the shareholders can only adopt the bylaws provided by the Ministry of the Economy, and (d) the Simplified Stock Corporation will need to be converted into a different type of entity if certain conditions are met.  Accordingly, individuals interested in forming a Simplified Stock Corporation should consult with a business and corporate attorney to determine if this is the right business structure for them.
Mauricio Leon de la Barra is a business and real estate counselor and attorney at law. He is one of the few attorneys licensed to practice law in both Mexico and California, and has more than 15 years of experience handling all type of business, corporate and real estate transactions.