The legal system of Mexico follows the pattern of codified law based on the Napoleonic Code of France. The laws are generally contained in codes, both at Federal and State level. Most of the provisions which are relevant to a foreign investor, such as trading and other commercial matters, corporations, foreign investment, intellectual property, income tax, value added tax, transfer of technology, antitrust and labor are regulated by federal statutes. Mexican corporate matters are mainly regulated by the General Law of Commercial Companies, the Securities Market Law, the Commercial Code, and the Foreign Investment Law.
Mexico offers several attractive alternate vehicles to foreign investors for doing business, either through the establishment of branch offices or through the incorporation of Mexican subsidiaries, which are regulated by the General Law of Commercial Companies. The most common commercial entities used in Mexico are the Stock Corporation (Sociedad Anónima) and the Limited Liability Corporation (Sociedad de Responsabilidad Limitada).
The Stock Corporation is a separate legal entity in which shareholders’ liability is limited to the payment of their respective capital contributions. Such capital contributions are represented by shares of stock which, as a general rule, are freely transferable. This type of entity offers flexibility for managerial purposes. The Limited Liability Corporation is a separate legal entity in which partners’ liability is limited to the payment of their respective equity contributions. Such contributions are represented by partnership interests, which are assignable by the affirmative vote of the majority of partnership interests with voting rights, that are properly represented in a partners’ meeting.
Mexican legislation has minor unique complexities that differ to other countries, specifically, with respect to the restrictions of foreign investment. The Foreign Investment Law establishes, as a general rule, that foreign investors may freely acquire holdings in Mexican companies, engage in new lines of business or manufacture new products and open, expand and operate establishments except with the participation of foreign investment in specific sectors or activities, such as in the manufacturing of explosives, air transportation services, maritime navigation, fuels, among others.