ILN: BUYING AND SELLING REAL ESTATE - AN INTERNATIONAL GUIDE

[BUYING AND SELLING REAL ESTATE IN MEXICO] 165

A Mexican Corporation is typically incorporated before “public faith officer”, such as Notarios Públicos (authorized by local governments) or Corredores Públicos (authorized by federal authorities) and requires a minimum of two (2) share or equity holders since, with a sole exception 2 , the concept of single- shareholder corporations is not allowed under Mexican law. It will have to carry out the corporate activities of any company, such as annual stakeholders’ meetings, have an active administrative body, file tax statements, etc. We strongly advice to seek local legal counsel in order to properly incorporate and tailor-made the Corporation’s purpose to the specific client’s necessities. The main advantages of holding real estate property through a Mexican Corporation could be, for example, that a national corporation, pursuant to applicable immigration requirements, would directly own the real estate, it could allow its stakeholders to live and work in the country and there is no limit as to the number of properties it may own. While the main disadvantages of a Mexican Corporation could be, for example, the undertaking of the daily corporate activities, including, but not limited, its administration, accounting 2 Simplified stock corporation ( sociedad por acciones simplificada ), which is a recently created type of entity not useful to acquire real estate. It is allowed to be incorporated by an individual single- shareholder (no entities allowed as shareholders). However, this type of entity is not recommended for foreign investment purposes, since its main purpose is to regulate small and medium businesses. Its shareholders may not have any equity participation in any other Mexican entity that allows them to control such entity and the corporation’s annual total income shall not exceed the equivalent to $5.8 million Pesos (approximately $283,197.00 Dollars, as of October 2021) .

reports, tax filings, LIE filings regarding its foreign stakeholders, etc. (b) Mexican Trusts Mexican trusts are very useful and flexible and therefore widely used as a vehicle by foreigners not only to acquire real estate, but for general business purposes as well. It provides solution to a wide range of personal and commercial needs. Trusts are mainly regulated by the Mexican General Law for Negotiable Instruments and Credit Transactions ( Ley General de Títulos y Operaciones de Crédito ) (“ LGTOC ”). Pursuant to the LGTOC, a Mexican trust is a commercial contract by which a settlor transfers title and management of certain assets and/or rights to a trustee — generally a bank or any other financial institution — , so that the trustee manages them under agreed terms, for the benefit of a person — could be, among others, a Mexican Corporation, a foreign individual, or a foreign entity — appointed as beneficiary thereto. The bank, as trustee, will be subject to fiduciary duties while representing the settlor interests in the trust assets. For example, should the trust purchase real estate property, the trustee should only carry out the transaction after verifying that all the title documents, property dimensions and/or any other documentation related to the property, are in order. On the contrary, if the real estate is not in good standing or up to date with the applicable legislation, the bank’s fiduciary duties shall prevent the trust to acquire such irregular property. During the past few decades, it has been very popular among foreign investors to hold property of real estate through a

ILN Real Estate Group – Buying and Selling Real Estate Series

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