[ESTABLISHING A BUSINESS ENTITY IN MEXICO] 340
(c) Did its earnings or if it destroys or modifies accounting documents of the SA; and (d) Ends or interrupts its activities without prior notice to the SAT. not record Furthermore, pursuant to the Mexican Bankruptcy Law ( Ley de Concursos Mercantiles ) shareholders, directors and subsidiaries of an SA may also be liable in frauds against third parties carried out by the SA.
for tax benefits of US parent companies, since it can be consolidated for accounting and tax purposes with US holding companies. This way, the organization has limited responsibility and pays taxes as a Mexican corporation, but it is considered, for tax purposes as a partnership in the US. We would strongly suggest that the above be confirmed by a US tax expert. (ii) Partner status In the SRL, capital increase requires the approval of the other partners, and the acceptance of a new partner requires a special quorum. As a general rule, such a special quorum requires the vote of the majority holders of the equity participations, unless a higher quorum is established in the by- laws of the SRL. (iii) Number of partners – No Industrial Partners The SRL may have a maximum of fifty partners and a minimum of two. Therefore, the SRL structure may not be used nor allowed for an initial public offering through the Mexican Stock Exchange. Unlike the SA, the SRL cannot have industrial partners who contribute their personal work. 24
2. The SRL
(i) Equity Structure
The capital of an SRL is divided into participation units. Evidence of participation as a partner resides in an equity participation registry, which shall be recorded in the company’s equity participation ledger (no physical title exists) and may only be transferred with the approval of the other partners through an assignment of rights agreement. In the SRL, each partner has the right to own only one equity participation, and each equity participation can have different values. Equity participations without par value are not allowed nor provided for in the LGSM. Due to US tax legislation (known as “Check-the-box” Regulations), the SRL, has been used in Mexico
24 The SA may have the participation of industrial shareholders who contribute their personal work.
ILN Corporate Group – Establishing a Business Entity Series
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