President Enrique Peña Nieto on June 14 signed into law certain amendments to articles 73 and 129 of the General Law of Mexican Companies, which has historically safeguarded the anonymity of stakeholders in Sociedades Anónimas (Mexican corporations) and Sociedades de Responsabilidad Limitada (Mexican limited liability companies). The weakening of anonymity resulting from these amendments could lead to a rise in shareholder-related litigation in Mexico.
Articles 73 and 129 required Mexican corporations and Mexican limited liability companies (LLCs) to keep corporate records with the name, address, and capital contributions made by stakeholders, as well as transfers of shares of or equity interests in the applicable entity. However, these records were only required internally and were not generally subject to disclosure to the government or the public. The amendments to article 73 applicable to Mexican LLCs and to article 129 applicable to Mexican corporations (Amendments) now require those entities to register shareholder/member information in an electronic database of Mexico’s Secretaría de Economía (Department of Economy) and to keep the information current.
Interestingly, while the changes to article 129 applicable to Mexican corporations include language requiring that the provided information be kept confidential by the Department of Economy, the revised text of article 73 applicable to Mexican LLCs omits this language. That said, article 73 provides that access to Mexican LLC records of members’ names, addresses, contributions, and transfers be limited to third parties showing that they have a legitimate interest in consulting such records.
We note that the changes implemented by the Amendments do not generally modify (1) the reporting obligations of Mexican companies under Mexican tax and foreign investment laws and their respective regulation, or (2) the recordkeeping and disclosure requirements of Mexican publicly traded companies under the Mexican Securities Law and its regulations.
The Amendments will come into effect on December 14, 2018, and while they do not kill the liability shield provided to investors in Mexican corporations or LLCs, it could be said that the anonymity of shareholders and members of such entities is on life support. This loss of anonymity likely could result in rising shareholder-related litigation in Mexico. While it will be interesting to see how Mexican courts handle the anonymity issues resulting from the Amendments, Mexican court proceedings are not public as a general matter. As such, it will likely take some time before we have federal court binding precedents providing guidance on this topic.