Mexico is a very attractive country for foreign investors, as shown by the Inversión Extranjera Directa (IED) (Foreign Direct Investment) figures, which increase annually. According to the Secretaría de Economía (Ministry of Economy), during 2017 the IED reached $29,695,000,000 USD dollars and the figures for the first quarter of 2018 broke records, with a 19.6 percent increase over the previous year. Because of its tourism bent, Puerto Vallarta is also the focus of foreign investors and, year after year, the number of companies that establish themselves in the destination increases, especially in the tourism sector.
What attracts foreign investment and the establishment of new companies both in Mexico and in our destination? What are the requirements and steps to follow to establish a company? To answer these questions, we spoke with Teresa López, a specialist lawyer who works with the legal firm MexLaw.
A Regulated and Very Attractive Market
According to the expert, Mexico offers more than just economic, competition and market benefits. “Our country complies with the standards that international law has in favor of foreign investors, such as the Fair and Equitable Treatment Standard and Full Protection and Security. In the case of large projects with development and impact to the nation, the implementation of clauses such as the ‘Umbrella Clause,’ which provides a high degree of security to foreign investors who tend to place capital in our country.”
With respect to attractiveness, in the case of Vallarta · Nayarit, López says that it offers a balance between security, landscapes and infrastructure. “This allows investors to find a wide range of opportunities to develop a project in the entertainment, construction/real estate, hotel and food sectors, which show frenetic growth.”
Is it Easy to Set Up a Company in Mexico?
“It depends on the type of project the investors have, since there are several nuances that must be observed regarding the number and type of partners and people involved, the economic activities that are proposed, the assets that will be allocated to them, the corporate governance to be determined and the manner in which its social capital will be represented. All these factors substantially influence the complexity and the means of establishing a company in Mexico,” she explains. In addition, she emphasizes that, although it can be complex, it is not difficult. “With the right advice, it can be obtained in a reasonable time, with great advantages and making use of the vast range of national and international systems for the optimal growth and development of a well-planned investment.”
Types of Businesses that Can Be Established
According to López, the most common businesses are classified into three large groups: personal, where a Sociedad en Nombre Colectivo (general partnership) is entered and the responsibility of the partners is unlimited, that is, it affects both the assets of the company and the assets of each partner against obligations to third parties; mixed, such as the Sociedad en Comandita Simple (simple limited partnership) and Sociedad en Comandita por Acciones (limited partnership with share capital), in which some partners have unlimited liability and others have limited liability; and the most well-known, those that only commit the entity, not personal assets, of which the most used are the Sociedad Anónima (corporation) and Sociedad de Responsabilidad Limitada (limited liability corporation).
Requirements to Create a Company in Mexico
· Denomination or social reason
· Partners (name, address and nationality, the number of partners depends on the type of company chosen, there are usually two)
· Corporate purpose (that dictates the legal capacity)
· The social bodies with their powers projected (either board of directors or sole administrator, supervisory board, which is optional, and assembly, which is the highest body of the company)
· Registered office (may also designate operational offices)
· Share capital with its form of representation (parts, shares), form of distribution of profits and losses, as well as duration, assumptions of dissolution and liquidation, among others
Regarding obtaining the statute and articles of incorporation of a company, López shares the following: “First, define the investment project with all the contents and nuances expressed. Then, carry out the process of selection of the name of the company before the Secretaría de Economía (Ministry of Economy)—when obtaining the authorization of the name, request from the same agency the use permit and wait for its resolution. Once obtained, carry out the process to formalize and notarize before a notary or corredor público (similar to a civil law notary public, but with specialized training in commercial law). Once this process has been completed, it is submitted to the Registro Público de Comercio (Public Registry of Commerce) for registration and for the legal effects to be produced before third parties, being a fully regular commercial company. Subsequently and with the partners’ documentation in order, register with the Servicio de Administración Tributaria (SAT) (similar to the IRS) to get the Registro Federal de Contribuyentes (RC) (Federal Taxpayers Registry). With this, the company will be ready to start operations, although it should be clarified that once all these steps have been carried out and foreign partners are available, the Registro Nacional de Inversión Extranjera (National Registry of Foreign Investment) should be used to carry out the registration of the company and formally report that there is foreign participation in it.”
Restrictions: Types of Businesses, Participation of Partners and Immigration Quality
López mentions that the Ley de Inversión Extranjera (Foreign Investment Law) has reduced the economic sectors where foreigners are totally restricted or where their participation is limited. “The sectors where the foreigner cannot participate as an investor, apart from those activities reserved exclusively for the State, are the national land transport of passengers, tourism and cargo—not including parcels and courier services—, development banking institutions, where the government has a direct participation or interest and the sectors where the provision of professional services is expressly indicated by the applicable legal provisions.
Regarding participation in the companies, López comments that the Foreign Investment Law limits participation to 10 percent in cooperative production companies and 49 percent in activities such as port services for inland navigation and port administration, as well as in printing and publication of newspapers with exclusively national circulation, broadcasting (where the principle of international reciprocity applies) and the manufacture and marketing of weapons and/or explosives.
Finally, in relation to the migratory quality of the investors, the specialist indicates that “in the case of foreigners, whether individuals or corporations, our legal framework also allows their participation in a Mexican company, but always observing the limitations of the Foreign Investment Law.”
Foreign partners can be visitors or residents, but it is important to note that temporary or permanent residence allows them to be involved in the governing bodies of the company (which partners do not have as visitors/tourists). “Foreign investors enjoy the same rights and obligations set forth in the company’s bylaws, as well as secondary laws that also regulate nationals.”