Part 2: Thinking of Entering Mexico – The Steps to Incorporating a Mexican Entity

Steps to Incorporating a Mexican Entity

Harris Gomez Group is proud to provide the four part series on the practical aspects of setting up in Mexico. Click on the link for Part 1 ¨Choosing the Appropriate Corporate Structure¨ 

For most Australians, a company can be set up in a matter of days where as in Latin America it is not uncommon for this process to take weeks and months.

In order to successfully incorporate a company in Mexico, it is important to understand the steps and timing involved.  This will help you ensure that you plan your business activities accordingly. There is nothing worse than having a contract ready to be signed while waiting for your entity to be set up.

In the case of Mexico, we recommend allowing 4-6 weeks for the complete incorporation process, although it is possible to shorten this timeframe in some cases. This timeframe also takes into account that documents that will need to be legalised in Australia and sent to Mexico before the process can begin.

Below is a basic outline of the incorporation process:

a)   Request authorization from the Ministry of Economy for permission to use company name. The issuing of a permit to incorporate a Mexican company under a particular name by the Ministry of Economy may vary, but normally it takes 1 to 10 working days;

b)   Drafting the powers of attorney to represent the foreign partners/shareholders in the incorporation of the company. Granting of said powers of attorney abroad before a Notary Public and legalization (in its case apostille in accordance to the “Convention de La Haye du 5 Octobre 1961”);

c)   Translation of the powers of attorney and certification by the official translator;

d)   Drafting the articles of incorporation and by-laws of the company. In order to draft the by-laws, your legal counsel will need to receive the following information:

1. Name of the company: In order to request authorization to use the company name, your legal counsel will need three name options in order of preference. This is a routine matter in which the Economy Ministry verifies if the names requested are available or in use by another company.
2. Partners/Shareholders. To incorporate a company in Mexico your legal counsel will need to have at least 2 partners/shareholders.
3.  Directors/Managers and Statutory Auditor (may vary depending on the company to be incorporated). Your legal counsel will need a list of the Directors/Managers of the company, specifying who will be Chairman and Secretary of the company. Please note that there is neither a minimum nor maximum number of Directors/Managers that have to be appointed. However, if only one is appointed, the same shall act as Sole Administrator/Sole Manager, with full powers to represent the company.
4.  Powers of Attorney to be granted by the company. Unless it is specifically provided by the by-laws of the company, the Directors/Managers and Officers of the same do not have specific powers of attorney, and therefore, powers must be granted separately. It is important to note that powers of attorney may be granted to any person, even if he is not a Director/Manager or Officer of the company.

e)   Completing the anti-money laundering procedure;

f)    Liaison with Notary Public in Mexico to carry out the notarisation of the powers of attorney and incorporation of the company;

g)   Carrying out the registration of the company before the Public Registry of Commerce;

h)   Filing notices to the National Registry of Foreign Investment in relation to the incorporation of the company and with respect to its foreign partners/shareholder;

i)     Coordinating with the accountants for the registration of the company before the Mexican Tax authorities with the purpose of obtaining its Tax ID (in most cases this step may be carried out by the Notary Public). Please note that in order to obtain the Tax ID Number the company needs a domicile for tax purposes, usually the domicile used is the same as the accountants, at least during the first months; and

j)     Opening the corporate books (partners/shareholder registry book, meetings and capital variations books in case of a variable capital company).

Practical Points:

• We recommend appointing a legal representative who is based in Mexico in order to avoid any issues with the banks or to deal with any urgent matters that may arise. When appointing a legal representative it is prudent to put in place special safeguards that will ensure the role is not abused.
• The corporate domicile of the company (different from the tax domicile) may registered in any State of the Mexican Republic. We recommend the corporate domicile be located in Mexico City due to the faster recordation process before the Public Registry of Commerce (required at the incorporation of the company, modification of its by-laws and articles of incorporation and granting of some POAs).
•  In Mexico, there are four kinds of general powers of attorney:  

1. Powers of attorneys for lawsuit and collections: This power is used to represent the company in litigations and in administrative procedures, normally it is also granted to the attorneys of the company.
2. Powers of attorney for act of administration: This power is used to represent the company in all kinds of agreements, which usually do not imply the disposition of fixed assets or the issuance of negotiable instruments.
3. Power of attorney for acts of dominion: This power allows the attorney in fact to dispose of the fixed assets of the company, including real estate.
4. Power of attorney to subscribe and grant negotiable instruments: This power of attorney is granted to subscribe negotiable instruments, to obtain loans and to open and close bank accounts.

Next week we will be detailing the practical steps of opening a bank account in Mexico.

About Harris Gomez Group: 

Harris Gómez Group is an Australian-Latin American legal and business advisory firm. In 2001, HGG was the first Australian law firm to have a local office in Latin America. The firm specialises in Common Law and Latin American cross-border issues in areas such as Mining and Energy, Corporate, Mergers and Acquisitions, Tax, Intellectual Property and Business Enterprises. With over 21 years of experience immersed in the respective legal and business cultures of Australia and Latin America, we create a seamless bridge between the two regions and have become an essential partner to many multinational enterprises.

If you need assistance with expanding your operations into Mexico or have an existing business, do not hesitate to contact at hello@hgomezgroup.com