Reform to Mexican Law Allows for Virtual Board and Shareholders’ Meetings Needing By-laws Amendments and Specific Requirements for Implementation

Summary:

• Mexican companies (SRLs and SAs) are now allowed to hold virtual meetings of shareholders or partners and of board of directors or managers to adopt corporate resolutions.
• This will allow partial or total virtual participation of the attendants, as well as resolutions adopted by majority and not only by unanimous vote.
• Mexican companies must expressly reference in their by-laws that they acknowledge and allow virtual meetings. Existing companies should amend their by-laws accordingly.
• Companies conducting virtual meetings need to provide mechanisms to allow access, representation, sharing, and making available evidence for the meeting either physically or electronically.
• Companies should still memorialize and type the outcome of virtual meetings and resolutions in minutes to be recorded in corporate books or notary deeds. Electronic signatures will be allowed in the minutes.

A decree from the Executive branch was recently published in the Official Gazette of the Federation amending several provisions of the General Law of Business Corporations (Ley General de Sociedades Mercantiles, or “LGSM”, by its acronym in Spanish), in order to expressly allow limited liability companies (SRLs) and stock corporations (SAs)  to hold Members’ or Shareholders’ Meetings and Board of Managers’ or Directors´ Meetings to be conducted through electronic and optical means or through the use of any other technology (collectively as (the “Reform”).

The purpose of the Reform is to ease the requirement previously provided by the LGSM for meetings to take place in person at the corporate domicile, making it difficult in most cases for the participants to attend or be represented in the decision-making process. Prior to the Reform, shareholders, partners, or members of the board were entitled to pass resolutions not meeting in person only if they were adopted unanimously and confirmed in writing. However, resolutions by majority always required in person meetings to be approved.  

The Reform provides the following measures, among others, to solve some of the issues above and to move forward more efficiently with the implementation of virtual meetings and resolutions:

1. The ability to host virtual meetings with some or all participants located outside of the corporate domicile.
   
2. Allowing for the virtual (remote) adoption of resolutions, without the need for unanimous approval by the majority required by law or in the corporate by-laws.
3. Companies shall allow virtual meetings and provide the legal mechanics to implement them in their by-laws. Existing companies not having these by-laws provisions should amend them accordingly and establish in them suitable mechanisms for their implementation to (i) allow the participation and identification of the attendees; (ii) counting votes; and (iii) generate, deliver, and make available the corresponding evidence and documents relating to the meeting, including by electronic means.
4. After a virtual meeting is held, minutes in writing shall also be prepared and recorded in the relevant corporate books and in notary deeds when legally required and signed either in wet or electronic signature by the Chairman and Secretary of the meeting and other participants. Electronic signatures shall comply with the formal requirements set forth in the Commercial Code to be valid.
5. Now both SRLs and SAs must publish calls for meetings, when required, in the electronic platform of the Ministry of Economy. Prior to the Reform, only SAs were obligated to comply with this requirement. This will be mandatory for SRLs six months following the publication of the Reform.

The Mexico City office of Foley is prepared to assist clients in the required drafting and amendments of by-laws to enable virtual meetings mentioned above, as well as to assist in the legal steps to properly implement and record such meetings, as ordained by the Reform. The team can also assist with other matters related to corporate governance for Mexican entities.