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Why use an Investment Promotion Company (S.A.P.I.) in Mexico?

In 2006, the Mexican legislation introduced a new type of corporate regime in the Security Market Law (LMV), the Investment Promotion Company, in Spanish known as Sociedad Anónima Promotora de Inversión (S.A.P.I.), which sought to innovate Mexican corporate law. Entrepreneurs commonly when making business alliances or starting a business always have doubts about what are the best ways to establish their business, the common questions are:

  • Should I incorporate a company?

  • Do I only change my regime before the Tax Administration Service (SAT)?

  • What kind of society to build?

A lawyer who practices corporate law must not only know how to answer these questions, but also provide suitable advice when faced with these doubts. Through this article, I intend to help answer these questions.

SAPIs are a fairly new model of companies, among its advantages are: (1) greater flexibility in corporate agreements, and (2) it loses some of the formalities that we find in the General Law of Commercial Companies (LGSM) in the regulation of the Corporations, known as Sociedad Anonima (S.A.). The reality is that SAPI is a type of S.A. with greater opportunities when it comes to doing business, it allows greater possibilities of financing and growth of companies, above all it allows the entry of new partners through more flexible partner agreements, than in the S.A. legislation was not foreseen, as provided for in article 16 of the LMV.

In addition to the above, the S.A.P.I. can acquire its own shares, a legal innovation that was not provided for in the LGSM. However, there are also some disadvantages that we can find from the above, since it is more flexible, there may be greater openness in the partners and, above all, more partners, and therefore loss of control of the Company.

Among other characteristics that can be estimated as a disadvantage or rather a challenge is that the administration of the Company must necessarily fall to a Board of Directors, unlike the Companies provided for in the LGSM that some may fall to a single Administrator, in these companies the administration can be difficult when the Administrators who form the Board do not come to agreement, and they represent the interests of different partners.

This type of company allows the entry of more partners and a possibility of adopting the administration regime of Public Companies (Stock Corporations), it becomes an advantage for companies called large taxpayers since it allows actions to be carried out more quickly without the need to have Force Partners meetings, likewise has flexibility to enter the stock market.

However, small and medium-sized companies must analyze carefully whether this company is convenient for them, especially if they will not have many partners, although the Company is flexible, but if it asks for greater requirements than those provided for in the LGSM, since their obligations are very high and perhaps small companies cannot cover them.

The advantageous reality of these companies is that they establish better practices of good corporate governance, which generates greater investor confidence, especially abroad.

The corporate model provided by the S.A.P.I. has modernized our obsolete Mexican corporate model. The introduction of this Society model creates a new business culture in Mexico for business growth and institutional transformation, especially for attracting capital and investment.

In companies that want to have investors who only inject capital, but do not intervene in the administration of the company or in the decision-making of the Corporation, this model of company is ideal because it allows the issuance of restricted voting shares, even without any vote, it is also possible to allow partner exclusion clauses, or withdrawal rights; it is basically a Corporation that allows receiving new investors without losing control of the organization and decision-making.

In addition to the above, there is security in the administration of the company since limits of responsibility can be established in the administrators, undoubtedly, a necessary advantage when the administration falls on someone other than the partners of the Company.

To conclude, we have that both small, medium and large taxpayers have a range of advantages when establishing an S.A.P.I. but it is important from the beginning to be clear about the course of the Company, since a small company that is growing and that seeks to attract capital without losing control the better choice is an S.A.P.I., as well as a medium-sized company, but if the idea is to continue under a small scheme with few partners and without much growth may not be the right option when incorporating (in the future perhaps); however, it is a great partnership tool for small, medium and large-sized companies to distinguish the rights of partners, investors and minorities.

For more information, contact Terry Ahtziry Cárdenas Banda, her e-mail is:

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