Amendments to the General Law of Business Organizations (Ley General de Sociedades Mercantiles, or LGSM) will enter into force on Dec. 14, 2018. Mexican companies (including Mexican subsidiaries of U.S. and other foreign companies doing business in Mexico) should be ready to comply with these requisites on transactions targeting to close in the last part of the year.
These amendments to Articles 73 and 129 of the LGSM (published in the Federal Official Gazette – Diario Oficial de la Federación – on June 13, 2018) require all public limited companies and privately held limited companies (sociedades anónimas) and limited liability companies (sociedades de responsabilidad limitada) to publish any notations made in their corporate ledgers evidencing the transfer of shares (acciones) or equity interests (partes sociales) in the Ministry of Commerce's electronic system (Publicaciones de Sociedades Mercantiles, or PSM). Pursuant to the LGSM, Mexican public limited companies and privately held limited companies (sociedades anónimas) and limited liability companies (sociedades de responsabilidad limitada) are required to maintain a corporate ledger with a record of its shareholders or partners, as applicable, including personal information such as name, nationality, address and number of shares/stock owned, and any transfer to the stock registered therein; any shareholder (accionista) or partner (socio) registered in the corporate ledgers as such, is considered to be the owner of such shares (acciones) or equity interest (parte social).
Prior to such amendments, corporate books and ledgers (and the transfers registered therein) were confidential in nature. However, with these amendments to the LGSM, the name, nationality and address of shareholders (accionistas) and partners (socios) will be kept confidential, except in the event that such information is requested by competent courts or administrative authorities. Nonetheless, the amendments to the LGSM are silent with respect to 1) confidentiality obligations applicable to publications of limited liability companies (sociedades de responsabilidad limitada) and its partners (socios) and 2) any failure to comply with such publication requirements.
Managers and legal counsels should bear in mind that these changes may affect ongoing transactions that are expected to close in December. There are three important steps in order for legal representatives of Mexican companies to publish transfers of stock reflected in their corporate books in the PSM: 1) the company must be registered with the Federal Taxpayer Registry (RFC) and must have obtained an electronic signature (e.firma) along with digital credentials (.cer and .key files), 2) the legal representative of the company must be registered with the Federal Taxpayer Registry (RFC) and must have obtained an electronic signature (e.firma) along with digital credentials (.cer and .key files), and 3) the legal representative must register with the PSM.
Subject to analyzing its practical implementation, these changes to the LGSM target to prevent opaque practices with respect to the legal life and control of Mexican companies, and strengthen anti-money laundering (AML) provisions. Also, they may provide an additional publicity tool in the due diligence process of future mergers and acquisitions (M&A) transactions.