Most Common Corporation Type in Mexico

Most Common Corporation Type in Mexico

(Sociedad Anonima / Sociedad Anonima de Capital Variable)

Although there are several types of corporations in Mexico, by far the most common corporation type in Mexico is the Sociedad Anonima (S.A.) / Sociedad Anonima de Capital Variabe (S.A. de C.V.). These corporate entities, consisting of two or more shareholders,  enjoy limited liability. The S.A. de C.V. and S.A. (hereinafter “S.A. de C.V.” for the sake of simplicity) are similar to the United States “Corporation” or “.Inc” legal entity. The S.A. de C.V. is a robust business form ideal for large scale operations.

Regarding shareholders, it contains legal mechanisms to protect the rights of minority capital investors. Minority shareholders have the right to call general shareholders meetings. Shareholders are represented in the administration of the company, obligatorily by law, by a Shareholder Auditor or Auditing Board that must be a disinterested party.

The S.A. de C.V. may have either a Board of Directors or a Sole Administrator. The S.A. de C.V. must maintain financial records to be reported monthly to the Shareholder Auditor or Auditing board. The administration of the S.A. de C.V. must prepare annual reports to the shareholders. Companies looking to enter the Mexican market often have two objectives when forming a subsidiary. They form a legal entity for legal formalities or an active legal subsidiary that will essentially operate as its own independent nerve center. For subsidiaries looking to maintain robust operations in Mexico, research and development operations, retaining large numbers of employees, and will offer a great degree of autonomy to the Mexican subsidiary, the S.A. de C.V. is ideal. The S.A. de C.V. facilitates the issuance of stock-based employment incentives

Ideal Uses:

• Mexican subsidiaries with major activities.
• Medium-sized to large business.
• Holding companies.
• Publicly traded subsidiary companies.

Basic Characteristics:

• 50,000 Mexican Pesos minimum capital stock.
• Must be managed by either a Board of Directors or an Administrator.
• Supreme authority over the corporation is exercised via General Shareholders’ meetings.
• General Shareholders’ meetings must be convened by law annually and may be either extraordinary (whenever called) or ordinary (held annually).
• Obligatory Auditor or Auditing Board to act on behalf of shareholders.
• Shareholders’ liability is limited to their capital investment.
• Company may issue different classes of stock.
• Each share is entitled to one vote.
• Double Taxation

Special Shareholder Issues

• 30% or more of shareholders may force an extraordinary shareholder’s meeting to address a specific issue or issues.
• No voting contracts are permissible.
• Shares may be negotiable and traded on public exchanges.
• Transfers of shares may be subject to approval of the Directors or the Administrator.
• Ability to issue stock-based employment incentives.

Special Administrative issues

• The Administrator or Directors must submit a progress report regarding the functioning of the company and its major policies annually.
• Detailed annual financial reports.
• The Administrator or Director must submit monthly financial reports to the Shareholder Auditor.
• The Shareholder Auditor must report annually to the shareholders’ meeting regarding the company’s financial position.
• The Shareholder Auditor must be present without vote at all meetings of the Board of Directors.
• The Shareholder Auditor must be disinterested, non-employee, non-blood relatives of directors.

Tax Issues

• Annual Income Taxed as a corporation in the United States.
• Monthly tax filings in Mexico.
• Value Added Tax.
• Income Tax.
• Corporate Flat-Tax.
• Annual Tax Filings.
• Double Taxation (taxed on corporate profits and shareholders must also pay personal income tax).