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  • Condominiums, strict liability and negligence. New case law.

    Are you or your company part of a condominium regime? Liability rules are changing. Administrators, members of the surveillance committee (board of directors), and condominium owners are now exposed to a broader liability standard for damages to third parties. This is what the Supreme Court of Justice decided in a new Jurisprudence. On Friday, March 8, 2024, the following case law were published: 1a. 40/2024 (11th) with digital Record 2028382, the thesis: 1a./J. 44/2024 (11th) with digital Record 2028384, the thesis 1a./J. 43/2024 (11th), with digital record 2028381 approved by the First Chamber of the Supreme Court of Justice of the Nation ("SCJN"). In this regard, the new criteria resolve various assumptions regarding tort, negligence, and strict liability. These new case law interprets the legislation of the State of Guerrero, which is similar to many states in the country, including Baja California, Baja California Sur, Chihuahua, Mexico City, Quintana Roo and Nuevo León. What do the new jurisprudence theses indicate? In matters of tort liability, the surveillance committee of a condominium may be liable for the acts or omissions of the administration that result in civil liability. Jurisprudence thesis 1ª./J. 40/2024 (11a.). In a tort liability suit, the administration of a condominium may be liable for his negligence and damages that occurred in the condominium's common property, Tesis 1ª./J. 44/2024 (11ª). In the case of strict civil liability, the condominium owners are liable for the damages that occurred in the common property of the condominium, in proportion to their aliquot part. Thesis 1ª./J.43/2024(11th). What were the facts that motivated the theses? Among the arguments sustained by the Supreme Court are the following: The Condominium Property Law for the State of Guerrero, similar to that of other states, states that the general assembly of condominium owners, the surveillance committee and the condominium administration are bodies for making and executing condominium decisions. Under the Condominium Property Law, the surveillance committee, as a collegiate body made up of condominium owners, is responsible for overseeing that the management complies with its functions and with the resolutions of the general assembly of condominium owners, and liability for acts of third parties means that the obligation to compensate the damage falls on a person other than the one who materially caused it because the first person maintains a bond of power, custody, care, surveillance, control, dependence or subordination with the second person. In this sense, the Law indicates that the surveillance committee is the one who has control and surveillance, as well as is subject to a supra-subordination relationship with the administration of the condominium. Therefore, the surveillance committee may be civilly liable for the acts or omissions of the administration that result in subjective civil liability, unless it proves that it has fully complied with its surveillance obligations. The Court pointed out that the Condominium Property Law establishes that the administration is the body in charge of taking care and watching over the condominium property and the common services; taking care of the efficient and adequate operation of the facilities and the general services, and performing the acts of administration and conservation necessary for the common areas, among other of its functions. Therefore, the administration, in its capacity as the body that cares for, watches over, and conserves the common property, the administrator or manager may be subjectively liable for damages occurring in the common property or areas of the condominium when they derive from his or her willful or negligent action or omission. The Condominium Law provides that the condominium owners have the right of co-ownership of the common property of the condominium, in proportion to their undivided ownership. In this order of ideas, the Court pointed out that the Civil Code of Guerrero, similar to that of most of the States, provides that the owner or original possessor of a property that generates a risk will be objectively liable for the damage caused, even if there is no fault or negligence on his part. Therefore, under applicable law, in cases of strict liability for events occurring as a result of a risk created by the property or common areas of a condominium, the condominium owners are liable under their aliquot share. Effect of judgments and their implications in civil liability matters. In residential, commercial, and industrial condominiums, these new case laws will influence the administration bodies. From these legal precedents, being the administrator of a condominium, or a member of the surveillance committee, generates a personal risk for whoever accepts the position. Furthermore, condominiums must take special care with the quality and qualifications of the persons they elect for the Vigilance Committee and for the administration, since their failures or omissions may entail a personal risk to the condominium owners. Today more than ever, strict compliance policies should be implemented within Condominiums, internal audits should be conducted to ensure maximum compliance with the law, and the extent and validity of all liability insurance should be reviewed. An audit of the terms of liability insurance contracts is highly recommended. Our team of experts can assist you in clarifying the level of protection of your insurance policies. Our firm, De Hoyos Aviles, has extensive experience in tort law and real estate law, and specifically in the legal defense of issues associated with residential, commercial and industrial condominium regimes in the cities of Tijuana, Mexicali, Los Cabos, Guadalajara, Puerto Vallarta, Cancun, Chihuahua, Monterrey and Mexico City, to mention a few. For more information, please contact us at contacto@dha.mx

  • DUE DILIGENCE FOR ACQUISITIONS IN MEXICO—SELECTED ISSUES

    Contribution for ABA Business Law Section – M&A Committee Deal Points Newsletter In the context of mergers and acquisitions, domestic or cross-border, due diligence is an essential component and an indispensable requirement for any such transactions to even gain traction in the early stages. The investigation of a target company’s structure, operations, and condition on various fronts is an exercise that every advisor or consultant to a buyer will recommend. Generally speaking, the purpose of due diligence is to prevent any risks that can disrupt the deal, or that might have financial, reputational or operational impact once the acquisition is closed, such be the case. The findings and conclusions often become determinant factors in the outcome of a transaction, be it the deal falling apart or a successful closing paving the way for a new stage of the business. While the above is now legal common sense to any corporate transactional legal advisor, it becomes necessary at times to add another layer of complexity when dealing in a context of cross-border transactions. The degree of complexity varies depending on the number of jurisdictions involved and whether such jurisdictions can be referred to as ‘investor-friendly’, among other factors. In this case, we intend to discuss a selection of relevant considerations when due diligence is performed on a target company located in Mexico. Understanding Particularities of Mexican Law Regardless of the type and scope of the due diligence, clients contemplating an acquisition should keep in mind the legal framework that applies to any potential transaction in order to obtain as many data as possible. The Mexican legal system derives from the civil law tradition. All laws are written in the form of main laws, codes and various types of secondary rules and regulations. Along the same lines, all permits, authorizations, licenses and legally binding contracts and agreements must be in writing. Therefore, a data room for a legal due diligence review should contain any relevant documents and information in written form. Secondly, there are specific areas of law that warrant special attention due to the potential for increased risk from a buyer’s perspective, namely: Labor Law: Mexican labor law is heavily pro-worker. For most cases, the burden of proof is lied on the employer and, in practice, the majority of employee claims are finalized through a settlement rather than awaiting a final resolution. It is critical to review compliance with legal obligations imposed on employers. A sample of required information for labor and employment diligence, would include an inventory and copies of the written, executed, individual employment agreements, collective bargaining agreements, registration of the company with the Mexican Institute of Social Security Institute and with the National Institute for Workers Housing Fund, among others. Real Estate: Land ownership in Mexico is divided into two types: private property (traditional fee simple for private parties, individuals, or entities) and an agrarian form of ownership created by the Mexican post-revolution regime called ‘Ejido’. A substantial portion of the country is owned by Ejidos, which are local communities with governing bodies and internal regulations subject to Agrarian Law. A real estate section of a due diligence request list would include (i) for private property, title deeds for the land and buildings owned by the company and its subsidiaries, registered liens or lease agreements, and any applicable governmental permits; or (ii) or in the event of Ejido land, the documents that support a private party’s right of possession through any given agreement, and the documents that evidence the legal authority of the Ejido representatives to enter into such agreements. Please note that in any case, local support would sometimes be needed depending on location to appear at state public registries. Foreign Trade and Tax: Mexico’s appeals include the number of free trade treaties (including the United States-Mexico-Canada Agreement, or USMCA) and its geographical location. Therefore, especially in the manufacturing industry, government incentives and programs to foster industrial activity are key factors that lead to interest in Mexican target companies (stock or assets). In-bond programs such as maquiladora or mechanisms to facilitate better cash flow availability through value added tax certifications play a critical role. In order to keep these benefits available, compliance with general tax obligations has become a requirement subject to permanent review. A review of this area should include tax returns, any authorization granted by tax authorities, and temporary import permits for equipment and raw materials, among others. Litigation: Litigation in Mexico has been traditionally long and often times expensive. Although significant steps have been taken to make judicial dispute resolution more efficient, the existence of potential contingencies and liabilities is always a possibility. These risks must be properly identified and reviewed by a litigation specialist in order to allocate a value to it. This section of the due diligence request list should include a list of lawsuits and other administrative (i.e, from or against government agencies) legal proceedings, constitutional lawsuits or injunctions (amparos), or any other judicial, arbitration or administrative procedure involving the company or its subsidiaries. The issues discussed above are not intended to imply that the diligence review on other aspects of a company’s legal life is less important. It is merely intended to highlight those components of the general process that may deserve special attention in Mexico. For example, organizational and corporate record-keeping is mandated by law, but it is frequent to find private companies (especially if they’re still family controlled or not publicly listed) with a low level of compliance. Moreover, the legal framework in areas such as data privacy, antitrust, anti-corruption and environmental has been evolving and broadening. Selecting a Local Team In a general due diligence, the buyer needs to work closely with advisors. Typically, a team of advisors is led by corporate lawyers, but financial advisors, accountants, tax experts, and in some instances, business-specific technical advisors are also required to oversee operational changes. When putting the team together, it is often beneficial to consider local legal counsel who have experience navigating the local business environment as it applies to the transaction at hand: (a) Geographically, knowing the country area or region where the target company is located, to the extent it is deemed relevant. (b) Politically, understanding that ‘all politics are local’, be it at a federal or local level. (c) Legally, mastering not only the applicable legal framework to the target’s business activities, but also the manner in which relevant government agencies work. Seller Profile; Business Culture. For a variety of reasons, public financing in Mexico is much less accessible than in other jurisdictions. The number of Mexican companies listed in any of the two stock exchanges is significantly low compared to other countries, which results in most businesses being privately owned. Such private companies will often be family owned and operated structures, or business operations with a low level of diligence in their corporate record keeping and financial reporting practices. This can likely result in actions required to be taken prior to closing, or at time conditions precedent to be complied with after the deal is closed. Considering the foregoing, it will be helpful to make an assessment on the seller’s business level of sophistication, so expectations can be set and managed properly for the deal process. While a legal due diligence is commonly performed, whenever possible, we recommend performing an operational due diligence which oftentimes, sheds light on many issues or practices that are not registered in any document or registry. Country Risk; Industry Risk. The country’s current Administration has taken actions seen by the international business community as a step back in building the nation’s economic development through foreign and domestic investment. These actions include enactment of laws or amendments to existing ones, orders and decrees aimed at times at foreign companies. In other cases, the actions have been directed at specific players in sectors deemed strategic to the country or to the industry in general, such as mining, renewable energy, infrastructure, power generation and fuels. Mexico’s President has also increased in an unprecedented fashion the involvement and authority of military bodies in areas such as customs and ports of entry operation, sanitary control agencies or highways and ports oversight, among others. Although a presidential election will take place summer of 2024, it is still important to keep the country’s current state of things in mind and determine, in consultation with your local team, any potential risks or impact that the diligence review conclusions. In conclusion, a traditional due diligence exercise typically follows the practice and standards used in the United States or the United Kingdom. However, it is essential to recognize the nuances that other jurisdictions may have, as discussed above. This awareness will derive in a better planning and organization of the review process, and lead to the expected results and achievement of the bottom-line due diligence purpose. If you’re interested in learning more or have any comments or questions, feel free to email me at luis.armendariz@dha.mx Luis Armendariz is a member of the American Bar Association, he is a Mexican attorney who represents private clients, family offices and companies investing in Mexico in various industries such as real estate. For more information, please visit his profile on LinkedIn or De Hoyos Aviles.

  • Mexico's new forced labor regulations.

    On February 17 of 2023, the Mexican government through the Ministry of Economy published in the Federal Official Gazette a decree whereby an administrative regulation to restrict the importation of certain goods into Mexico was enacted. This decree (“Forced labor regulation”) became effective on May 19, 2023, and seeks to ban the import of goods into Mexico that are subject to regulation by the Ministry of Labor and Social Welfare ("MLSW”) applicable to those goods produced in whole or in part under forced labor conditions as well as those produced with child labor. The forced labor regulation is the result of Mexico's commitment under the United States-Mexico-Canada Free Trade Agreement. ("USMCA"), to ban forced and compulsory child labor. The forced labor regulations complete the applicable domestic legislation on foreign trade and sanction those who do not comply, in accordance with the commitments assumed by Mexico previously, such as the fundamental conventions on USMCA Compliance ("ILO"), specifically Convention No. 29, as well as Convention No. 105 on the Abolition of Forced Labor and Convention No. 182 on the Worst Forms of Child Labor. The ILO considers forced labor or exploitation to be “any work or service that is required of an individual under the threat of punishment and where that individual does not volunteer himself.” USMCA Compliance In accordance with USMCA provisions, Article 23.6 requires that Mexico must have a procedure to receive, analyze and respond to scenarios of use of Forced labor, including forced child labor by companies located outside USMCA´s territory, and thus prevent any merchandise from such forced or compulsory labor from being imported into Mexico. Proceedings The Forced labor regulation implements two types of verification procedures; whereby the MLSW has the authority to initiate proceedings to investigate labor standards in place in the companies’ producing goods at the time of investigation. The types of verifications are: a) In collaboration with foreign authorities, the MLWS will decide if the imported goods are produced with the use of the labor of workers in a situation of forced or compulsory labor, in accordance with international parameters on the matter. b) Procedure to request information directly from importers. Under Article 23.6 of the USMCA, an investigation into whether goods were produced using forced labor can be initiated by MLSW ex officio or by any private party. The request must be in writing and should, if initiated by a private party, provide specified information, including evidence supporting the forced labor allegation. Should MLWS find enough evidence to initiate proceedings, it can coordinate with authorities from the country where the alleged force labor merchandise comes from to investigate whether the goods were produced under forced labor conditions. On the other type of verification, MLSW must notify the importer about the proceeding so that he may respond accordingly. The request for investigation by a private party may be submitted at the offices of the MLSW or through the Digital Window. The MLSW might request the importer further information if necessary. After the initial proceedings, the MLSW might discard the proceeding if there is a lack of evidence to support the claim, and the file will be archived. Whatever the determination of the MLSW turns out to be, it will be listed in the secretariat's portal´s list of current resolutions issued by the authority. When sufficient elements to investigate are found, the MLSW will notify the importer who has twenty working days to respond. The authority must issue a resolution within 180 working days that will be published on its website. Provided that it is proven that the use of labor by workers in that situation has ceased or that the determination in this regard has been rendered ineffective by the authorities of other countries, the importers or any private person can request that the resolution is annulled or, where appropriate, request an updated to the WLSW´s aforementioned list. Main difference between the Mexican Forced Labor regulation and the United States and Canada's approaches Under Mexican regulation, the MLSW can give high deference to whatever resolution the authority of the foreign country would issue on the subject good whereas in the US and Canada the authority must conduct its own investigation independently and issue a ruling based upon its own findings. Recommendations for companies (forced labor regulations) Companies should conduct analyzes of their suppliers of goods and, where appropriate, determine whether they come from jurisdictions, markets, or companies that have forced or child labor practices. Companies must implement effective due diligence practices and adopt appropriate controls to ensure that the entire supply chain is compliant with these new regulations. We recommend that Mexican companies adopt new traceability systems in the entire supply chain to duly comply with regulations. Importers must maintain Files with information and backing documents that demonstrate that the importers merchandise are not covered by the lists on the MLSW site. We recommend that at risk companies are being prepared and take the necessary measures to deal with the possible consequences of an investigation procedure, which in this case, can range from reputational impact to stopping import activities, breaching contracts with current suppliers, and looking for new suppliers/manufacturers that operate under legal and acceptable working conditions. Companies must continue to comply with any other import requirements or regulations in addition to what is provided for in the Forced labor regulations. Our Business Law and Labor Law practice group has extensive experience in these matters. For further information, please contact us at contacto@dha.mx This note does not constitute legal advice. You should consult a specialist before making any decision.

  • The Mexican supreme court rules that the statute of limitations for the action to declare void the registration of a trademark granted illegally never expires.

    On January 29, 2024, the plenary session of the Supreme Court of Justice ("SCJN") or "The Court" uphold that section I, last paragraph, of article 151 of the Industrial Property Law ("LPI") (repealed), is constitutional and thus actions to claim the nullity of the registration of an illegally granted trademark could be exercised at any time because the mere passage of time cannot remedy the illegality of its grant. Facts. Two companies, Autofinanciamiento de Automóviles de Monterrey, and Grupo Autofin Monterrey, both public limited companies with variable capital, submitted a petition before the Mexican Institute of Industrial Property to request the nullity of a trademark and to revoke its registry. On the one hand, the petition to revoke the trademark registry of Grupo Autofin México y diseño was requested, as this trademark belongs to Autofinanciamiento México, S.A de C.V. The petition to revoke the registry was recorded with file number P.C.1083/2015 (C-330) 9471 and the petition to revoke the trademark registry of Grupo Autofin México y diseño, that belongs to Autofinanciamiento México, S.A. de C.V., was recorded with file number P.C. 1976/2015 (N-562) 18184. Both applications were admitted for processing and subsequently joined, and a resolution based upon article 151, section I, last paragraph of the LPI was issued so that any action to request revocation of a trademark registry granted illegally, may be exercised at any time even if the LPI law has been repealed. In other words, legal action never expires. Based upon this resolution, the Divisional Deputy Director of Industrial Property Processes of the Mexican Institute of Industrial Property declared the nullity of the trademark registration of GRUPO AUTOFIN MEXICO and design; as well as the administrative process P.C. 1083/2015 (C-330) 9471. Dissatisfied with the resolution, Autofinanciamiento de Automóviles de Monterrey, and Grupo Autofin Monterrey, filed a lawsuit against the decision that vacated the administrative process P.C 1083/2015 (C-330) 9471 and likewise, Autofinanciamiento México, filed an administrative lawsuit regarding the declaration of nullity of its trademark registry Grupo Autofin México y diseño. On October 1, 2018, the Specialized Chamber recognized the validity of the contested administrative resolution and Autofinanciamiento México filed a direct amparo lawsuit asserting several claims, but most importantly, the unconstitutionality of Articles 151, section I, last paragraph, and 90, section XVII, of the LPI because, in his opinion, they violate the fundamental right of legal certainty. Issues. The legal issue for the SCJN was to decide whether or not Article 151, Fr. I, last paragraph, and Article 90, section XVII, of the LPI, violated the fundamental right of legal certainty. Holding. The Court held that section I, last paragraph, of article 151 of the repealed LPI, is constitutional. This section of the law provides that legal actions to declare null a trademark registration that was illegally granted may be exercised at any time. The Court upheld the judgment of the Collegiate Circuit Court ("TCC") and granted an amparo to the complainant, against the judgment issued in October 2018. Consequently, the Specialized Court in Intellectual Property Matters of the Federal Court of Administrative Justice, had to vacate its previous judgment and issue another judgment in the same matter analyzing whether all the legal elements concerning the use of the trademark "Grupo Autofin México" were met. Rationale. The plenary of the SCJN analyzed and argued the following: The Court analyzed whether Article 151 of the LPI, which provides for the right to bring a lawsuit to revoke an illegally registered trademark, regardless of the time elapsed since their registration; was constitutional. The Court argued that for a trademark registry to be null and revoked, the plaintiff should challenge aspects of special importance related to essential requirements of the trademark. The Court held that legal operators should consider the seriousness of the illegality committed in the trademark registration in order to determine whether or not it should be rendered ineffective, even after several years. The ruling recognizes that the absence of a deadline to claim the revocation and nullity of a trademark does affect legal certainty of those who have the registration. However, the ruling provides that in the case of serious breaches, it is valid that lawsuits can be filed at any time. Likewise, the Court held that the status of limitations does not apply to the action to claim the revocation and nullity of trademark registration that was illegally granted, and that the lack of expiration to file a claim in this particular case is a proper way to achieve the constitutional purpose of the article, as it refers to rights that would have been granted illegally, and thus no person should benefit from a right granted against the Constitution. The SCJN deemed the article adequate as it prevents the unfair practice that is intended to be eradicated from acquiring finality or definiteness and, therefore, the lack of a set statute of limitation to bring this claim is justified, and it is necessary to correct the non-observance of the law. In addition, the Court held that the legislative measure is proportionate to the purpose sought. In this regard, the court held that the degree of protection arising from the lack of a time limit to file for revocation and nullity action is related to the lower degree of protection and the need for greater publicity of the trademark. Why is this Court ruling relevant? As a general rule, in Mexico, the statute of limitations for commercial proceedings varies depending on the nature of the action, under the Mexican Commerce Code, actions regarding a corporate charter and shareholder actions, and actions against liquidators of a corporation lapse in 5 years and in civil matters. The most common statute of limitation is 10 years and a two-year period to claim damages, fees, salaries, wages, among other remuneration for the rendering of any service. This ruling is important because the Supreme court held that there is no statute of limitations for legal actions against illegally granted trademarks, and thus foreign companies or their Mexican affiliates or subsidiaries could bring a claim to revoke a trademark in the country if such were granted illegally many years ago. For further information, please contact us at contacto@dha.mx, our litigation and business law practice group will be able to assist you. Disclaimer: This note does not constitute legal advice. Before making any decision, you should seek expert advice.

  • SECURITIES MARKET LAW AND INVESTMENT FUNDS LAW AMENDMENT

    On December 28, 2023, the President of Mexico published in the Federal Official Gazette (Diario Oficial de la Federación) a decree (the “Decree”) that amends the Securities Market Law (LMV) and the Investment Funds Law (LFI). The Decree amends, adds and repeals several sections and provisions of said laws. This amendment intends to improve access to the stock market for small and medium-sized companies (PyMES), providing them with accessible financing alternatives. To review the official Decree in detail, you can click here (in Spanish). The main changes to the LMV and the LFI are listed below Securities Market Law Simplified Securities Registration This new procedure will allow PyMES to access the stock market through public offerings of securities, either of debt or stock. This new modality simplifies the process of listing on the stock market, making it faster and at a lower cost. According to the Decree, the National Banking and Securities Commission (CNBV) will have the authority to determine the requirements that must be met to adopt this simplified regime, as well as the capacity to withdraw the simplified registration in accordance with the provisions set forth in the LMV. The stock exchanges will be the supervisors of the issuers under this regime. Corporate Regime With the Decree, the requirement for Investment Promotion Corporations (commonly referred to by their acronym in Spanish as “SAPI”) that wish to register their shares or debt securities in the National Securities Registry to adopt the Public Stock Corporation regime (S.A.B.) within 10 years is revoked. Likewise, the requirement to develop a program for the gradual adoption of the S.A.B. corporate governance is also revoked. Delegation of Authority to the Board of Directors The shareholders of a S.A.B. and of the Public Stock Investment Promotion Corporations (S.A.P.I.B.) are allowed to delegate to the board of directors the authority to increase the capital stock and to set the terms of the subscription of shares, including the exclusion of the preemptive subscription right in connection with the issuance of shares regarding the delegation. Takeover Protection in S.A.B.’s. Through an extraordinary (i.e., high quorum required) shareholder resolution, the shareholders may adopt bylaws provisions that prevent the acquisition of shares that grant control of the company to third parties or to the shareholders themselves. For this purpose, 20% or more of the capital stock present at the respective meeting must not vote against these provisions. Prior to the Decree, it was 5% or more. Investment Funds Law Regarding the amendments to the LFI, important innovations are introduced in the investment funds field, especially with the incorporation of hedge funds, which are designed to dynamize the capital market, offering new investment and financing options. Hedge Funds Shareholders The shareholders of hedge funds are limited to qualified investors (authorized by the CNBV) and institutional investors (financial institutions or those with such status under applicable laws). This provision encourages only investors with the necessary experience and financial capacity to engage in this type of investment. No limit on Share Holding Hedge funds will not be required to adopt the maximum shareholding limits per shareholder that apply to other investment funds under the LFI. Authorized Advisors Hedge funds can be established and operated by investment advisors authorized pursuant to the provisions of the LMV, without the need to have an investment fund operating company, as is the case with other funds regulated in the LFI. Transactions with Various Assets Hedge funds will have the ability to trade in a wide range of investible assets, as defined in their informative brochures What’s next? What’s next? That the CNBV and the Mexico’s Central Bank issue the corresponding secondary regulation within 365 calendar days from December 29, 2023, so that stock exchanges, companies and funds to be listed under the new modalities have clear and specific rules to be able to apply the provisions of the Decree. For more information, please contact us by e-mail: luis.armendariz@dha.mx

  • Investing in Mexico. Buyers‘ guide to acquire property from compliant developers and sellers.

    If you are planning to buy real estate in Mexico in locations such as Los Cabos, Loreto, Puerto Vallarta, Cancun, Tulum, Playa del Carmen etc. this article is for you. With an increasing number of options to choose from, prospective buyers need to be aware of recently enacted commercial regulations for the real estate marketplace. The NOM 247-SE-2021 was released in the first quarter of 2022. The NOM´s purpose is to guaranty that the sale of housing real estate, related agreements, commercial practices and advertising information provided to prospective buyers are compliant with certain requirements. To whom does it apply, and who is obliged to observe it? This regulation is applicable to suppliers of housing in Mexico who are builders, developers, brokers, and any person who participates in the advice and/or sale to the public of real estate intended for housing. It is mandatory for individuals or companies engaged in marketing residential properties to the public in the country. The NOM does not apply to commercial real estate sales or private individuals who sell their property in a direct deal with the buyer. What is NOM-247-se-2021? The NOM regulates the information requirements for the marketing and advertising of real estate for housing purposes, the NOM also sets forth the basic elements for contractual agreements between the parties and seeks to regulate some of the rules of the Consumer Protection Law and laws on urban development, civil protection, urban housing, personal data protection among others, that are applicable to consumers that aim to purchase real estate for housing purposes. As of September 22, of 2022 when the NOM became enforceable, full disclosure became law for all residential housing. What are the main obligations? Obligations contained in NOM 247 are categorized into four types: a) Relating to commercial practices, (b) Relating to commercial information requirements, (c) Advertising of real estate intended for residential purposes and, (d) Mandatory elements in contracts. Prospective buyers should verify that sellers, brokers, developers etc., comply with certain obligations. As the obligations in NOM 247 are numerous, the most relevant ones are presented below: Down payments. Proof of advance or down payment must be given to the buyer. Pre-sales obligations. Buyers must verify that the seller or broker shows the sale price of the property as well as its features. The seller, developer, broker, or advisor must have economic capacity should a claim or request for a refund occur. The pre-sale must be made by means of a pre-sale adhesion contract for real estate intended for housing. Data Privacy Obligations. Potential buyers must verify that the provider has a Privacy Notice, and should the provider indirectly obtain any personal data, he must inform the data owners of the details of how he obtained such information. Data Privacy Law applies. Obligation to have channels to deal with complaints and requests. Buyers must have access to free and accessible consumer service mechanisms that operate on working days and hours, and must be able to ascertain a public address for the provider to hear and receive notifications. Internet Portal. Buyers should verify that the internet portal is updated with information such as prices, types of properties, membership contract models, among others. Obligations in the field of real estate development. Promotion must be clear and with up-to-date information, avoiding abusive or coercive conduct or commercial practices. Obligation to deliver a Bill of Rights to consumers. Buyers should receive a letter (physical, printed, or electronic media format) explaining the protection afforded by the Federal Consumer Protection Law ("LFPC") Obligations regarding information used by suppliers. The information must be in Spanish and other languages if desired, but if there are inconsistencies in the text or wording, the Spanish language will prevail. The information must be verifiable, clear, and not contain dialogue or images that could lead to error or confusion. It must contain the price of the property, payment terms, credit, among others. Contract termination. The NOM requires that information provided to the consumer about a possible termination of the contract must clearly include that the parties will reimburse each other for the services rendered and when the property has been delivered, the supplier/seller may demand it plus an amount at the rate of rent in case of use and/or compensation if there is demerit of the property. In the case where part of the price has been paid, the seller may demand interest and, if more than one third of the agreed amount or the total of the agreed payments have been paid and the supplier demands the termination or performance of the contract due to default, the consumer shall be entitled to opt for rescission or payment of the overdue debt. Plus, any benefits that may be applicable. Adhesion contract. Thanks to the NOM, buyers are protected from illegal clauses. Adhesion contracts will be invalid if they have clauses that are not permitted. For example, clauses that unilaterally modify the terms and conditions of the contract, (except when it implies a reduction in the price or a benefit to the buyer), those that transfer the civil liability of the supplier to third parties outside the contract or that release the supplier from its civil liability or that derived from the existence of hidden defects or in case of eviction, shorter statute of limitations than the legal ones, among others. Mandatory advertising provisions. Potential buyers should validate that supplier's advertising is verifiable, clear, and truthful. The description of the property must be true to reality, and must describe the materials used, the date of construction among other features. The seller must inform everything concerning the property and abide by negotiated terms throughout the process such as price, rates, guarantees, deadlines, reservations, etc. The project must be available in physical or digital form to share with the buyer. Final Recommendations. Buyers have the right to select the notary public who will formalize their purchase and they are protected by PROFECO (Consumer protection Federal agency) and several governmental and private groups such as the Mexican Association of Real Estate Professionals that is associated with the U.S.-based National Association of Realtors that also protect potential buyers. Buyers that seek to buy real estate in beach destinations such as for example Los Cabos are also protected by the State´s multiple listing associations that operates policies that govern listings and advertising of properties. We recommend seeking professional legal advice before signing any type of contract or agreement. Our firm has an experienced team of attorneys focused on real estate matters. Both in transactions and in the resolution of disputes related to real estate sales and timeshares. If you have any questions, you can contact us at contacto@dha.mx, we will respond immediately. Important note: This article is not legal advice. Before making any decision, you should seek the advice of a professional you trust.

  • Virtual meetings are now an option for Mexican commercial companies.

    The amendment impacts significantly on the mechanism for holding shareholders' meetings and administrative bodies´ sessions. On October 20, 2023, an important amendment to the Mexican General Law of Commercial Companies (LGSM, per its acronym in Spanish) was published. The amendment impacts significantly on the mechanism for holding shareholders' meetings and administrative bodies´ sessions. In summary, it eliminates the obligation to hold such meetings in person and establishes rules for holding them through electronic, optical or any other technology means. In other words, opens the door to holding virtual meetings. When this amendment shall be effective? October 21, 2023. What will happen to companies incorporated before this date? Companies incorporated before the amendment will have the option to reflect the new rules into their bylaws. What actions are recommended? It is recommended to review and amend your company's bylaws as soon as possible to take advantage of virtual meetings. Relevant aspects and legal situations that may be resolved with the reform. Comparison of in-person attendance with electronic media. The reform focuses on enabling electronic and optical means or any other technology, and consider such means equivalent to in-person attendance of meetings and sessions. Article 75. Article 6. Full Equivalence. The reform grants full equivalence between the use of traditional means and electronic means, as well as technology neutrality. Article 143. Attendance Options. Pursuant to the reform, shareholders´ or partners´ meetings may be held fully or partially in person or using electronic, optical, or other technological means. Article 82. Article 178. Corporate domicile. The amendment clarifies that a shareholders´ meeting shall not be deemed held outside the company's corporate domicile when electronic, optical or other technological means were used to hold it. In addition, shareholders may hold meetings outside the company's corporate domicile, provided all shareholders approve to do so, and the shareholders´ right and option to attend the meeting either in person or using electronic, optical, or other technological means is guaranteed. With the reform, discussions regarding the place where the meeting was held will be resolved, and it is entirely up to the shareholders to decide the best mechanism to validly approve resolutions. Article 80. Article 179. Voting rights protection. Access of each of the shareholders to meetings or sessions shall be guaranteed by measures or mechanisms to protect voting rights. Appropriate evidence must be produced to guarantee the legality of these types of meetings. Article 6. Geographical Location. The geographical location where meetings may be held is now more flexible, so that the decision-makers of the companies may determine the format and place where to hold the meetings. Call to Meetings. The call shall be published in the electronic system of the Ministry of Economy, and shall contain the agenda, signature of the person calling the meeting, and shall be published with the anticipation established in the bylaws. Article 81. Article 186. Use of advanced electronic signature. A novelty of the reform is the use of the advanced electronic signature, (in accordance with the provisions of Article 7 of the Law on Advanced Electronic Signature) in electronic documents and data messages, and grants the same legal effects than documents signed by hand. Accordingly, these documents will have the same probatory value pursuant to applicable provisions. Article 194. First virtual Shareholders' Meeting: The reform allows a first meeting to authorize a set of rules and requirements to hold a valid meeting, for example, with respect to attendance lists, appearance at the corporate domicile of the "host" of the meeting. Meeting formalities: The reform resolves the issue of attendance and voting of the entirety of shareholders with voting rights, for purposes of implementing the mechanisms to be followed to reach agreements when holding virtual meetings. Accordingly, the amendment requires resolutions adopted are confirmed in writing and posted in the shareholders´ meetings minutes book. Finally, if deemed necessary, the minutes may be notarized before a public attestor. Article 194. We recommend all of our clients to prepare for this new stage of corporate law. It is advisable to review and eventually amend the company's by-laws. For further information, please contact one of our partners or send us a message at contacto@dha.mx

  • Mexican Law and Religious freedom

    Our litigation team, again before the Supreme Court of Mexico. The subject: Religious freedom. Mexico's Supreme Court of Justice will resolve an emblematic religious freedom and inheritance rights case. Summary of the facts: An elderly person drafted a will leaving as heir of all his assets to a priest of the Catholic Church. The only living relative of the author of the will hired the services of our firm to claim the nullity of the will. The Federal Constitution and the Civil Code contain an absolute prohibition for church ministers to acquire by inheritance. This prohibition has deep historical roots in Mexico, due to a fundamental principle of church-state separation. The trial judge as well as the State Court of Appeals declared the will valid. The State Court of Appeals recognized that the prohibition of inheritance for priests exists, but considered that such restriction is unconstitutional, as it affects the fundamental rights of priests. In the Court of Appeal’s opinion, the right to inherit must be protected over the restriction to inherit. For this reason, using diffuse constitutional control, the Court decided to disregard the law that prohibits ministers of worship from inheriting property. Judicial review: Our litigation team challenged the State Court judgment. Normally, these types of matters are resolved by a Federal Circuit Court. However, given the importance of the precedent, we asked the Mexican Supreme Court to hear the case. The Supreme Court accepted our petition and assumed jurisdiction in this matter. Our brief is already under consideration, and Minister Margarita Rios Fajart has been appointed as the Minister rapporteur, with file number xxx. Issues to be resolved by the Supreme Court of Justice: In resolving this case, the Supreme Court of Justice will issue a relevant precedent, in matters of inheritance law, religious freedom and freedom of worship. The Court will have to place, on one side of the scale, the freedom to make a will and the right to inherit. And on the other side, the historical principle of freedom of worship and separation of Church-State, as well as its evolution in the history of Mexico. In order to decide the above, an in-depth study of the scope, evolution, and interpretation of Article 130 of the Mexican Constitution must be made. What are the implications of this case? Litigation involving religious freedom and freedom of worship is not frequent. Although the heart of the matter appears to be a question of inheritance law, in addressing the issue the Court will have to issue a pronouncement that could reshape the position of churches and religious ministers before civil legislation. Our litigation team, in this case, is led by the Partner Jorge E. de Hoyos Walther, with 35 years of expertise in Federal Appeals, the Partner Jaleyna de la Peña Molina, an expert in family and inheritance law, and Rafael Obregón Orendain, an associate specializing in family and constitutional law.

  • DE HOYOS AVILES OPENS SECOND OFFICE IN THE STATE OF CHIHUAHUA, MEXICO

    Chihuahua, Chihuahua. April 2023. DE HOYOS AVILES announced today the opening of its new office in the City of Chihuahua, the State of Chihuahua’s capital. With a population exceeding 3 million, Chihuahua is the country’s top manufacturing exporter state in Mexico, the fifth-ranked city in export manufacturing employment, and a top 5 worldwide location for investment from the aerospace industry. Chihuahua City is also home to some of the country’s main mining and agro-industrial companies. The office will be headed by Luis Armendariz. Luis earned his Law Degree from Tecnologico de Monterrey (Monterrey Campus) in 1998, his master’s degree (LL.M) from Northwestern University’s Pritzker School of Law (2006) and a Degree in Business Administration from Kellogg School of Management (2006). He worked at top-level law firms in Mexico, and then was a foreign associate at the Phoenix Office of Bryan Cave (now Bryan Cave Leighton Paisner) from 2006 to 2009. Since then, he’s focused his private practice in Business Law, Cross-Border Transactions, External General Counsel Services and Compliance across different industries such as real estate, mining, manufacturing, agro-industry and alcohol & beverage. Having lived, studied and worked on both sides of the U.S.-Mexico border, he is a bicultural professional fully fluent in English. With a recognized trajectory, Luis Armendariz represents U.S. and Canadian companies doing business in Mexico. Therefore, his team is a proper fit in De Hoyos Avilés position, as the go-to team of lawyers for companies and projects throughout the U.S.-Mexico border. Jorge E. de Hoyos-Walther, De Hoyos Avilés’ managing partner, commented: “We are very pleased with the addition of Luis Armendariz to the team. Chihuahua is the largest state in the country. With this new office, in addition to our office in Ciudad Juárez headed by Ivonne Aguilera, we will cover the entire state quickly and efficiently. We also consolidate our leadership along the USA-Mexico border, as well as Central and Western Mexico.” Luis Armendariz, the firm’s new partner and director of the Chihuahua City office, said: “I am very fortunate to join such a high caliber team, which also happens to have a rapidly growing and sophisticated corporate practice group. De Hoyos Avilés offices throughout Mexico and the firm’s calling to serve clients from the North American Region make it a perfect fit for me and my team and will enable us to serve our clients better.” De Hoyos Avilés’ new office will be its tenth in the country, strengthening its presence throughout the country and increasing its coverage in North Mexico. “De Hoyos Avilés broad platform, lean-staffed offices and expertise in cross-border business allows our team to better address our client needs,” said Armendariz. “We also share the same values in terms of focusing on building long-term relationships with clients through high-quality work coupled with a responsive and personal approach.” About DE HOYOS AVILES DHA was founded in 1964 in Monterrey, State of Nuevo León, by Gustavo de Hoyos-Guevara. The firm has almost 60 years of experience in Complex Litigation, Business Law, M&A, Commercial and Real Estate transactions. With offices in Mexico City, Guadalajara, Tijuana, Mexicali, Los Cabos, San Luis R.C., Reynosa, Matamoros, Ciudad Juárez and now in Chihuahua, the firm consolidates its team and nationwide coverage in the country’s most important cities. From any of such cities and having a wide network of local correspondents in the country, De Hoyos Avilés can serve its clients anywhere in Mexico. Membership in the Nextlaw Referral Network provides De Hoyos Avilés with unprecedented global reach, including leading capabilities in 205 countries. The firm has access to top lawyers in any practice, industry or sector, anywhere in the world, enabling the firm to provide its clients with the best local and global services possible. The Nextlaw Referral Network makes us truly ‘in and of the community’.

  • WHAT TO DO IF YOU HAVE BEEN SUED IN MEXICO

    If you are sued in Mexico, it is important to take quick and effective measures to protect your legal interests. In this article, we will explore the steps you should follow and how you can ensure that your legal rights are defended, and your obligations are respected. Foremost, you should know that unlike the United States or other countries, Mexican procedural laws are very strict, and that you can lose a case by a mere formality. So, it is significant that you meet all deadlines and procedural obligations. Secondly, you should carefully read the complaint that has been filed against you and determine the specific charges or claims that are being brought. This will help you understand the basis of the complaint and the extent of your responsibilities. It is also important that you immediately contact an experienced attorney for legal advice. Now, it must be considered that not all lawyers are appropriate for all matters, nor are all matters right for all lawyers. Depending on the size or type of case, a large or small firm may be a better or worse option. In addition, unlike the United States or other countries, in Mexico, the areas of specialty are not well-defined since there are no obligatory certifications or mandatory bar memberships. Therefore, you must be careful in the selection of the lawyer that will represent you. Once you have consulted an attorney, you will need to respond to the complaint within the time frame established by law. The time frame may vary, depending on the state or venue, but it is usually a short period, it can be 5 to 9 days. Your response can be a denial of the claims, or a partial or total admission. It is important that your response be clear, precise, and presented within the time frame the court has determined. This is a critical issue because in Mexican law, the judges cannot extend deadlines. If you do not respond on time, you will default, and most likely lose the case. In addition to responding to the complaint, you may need to provide relevant documents and evidence to the case. This can include financial records, public deeds, legal documents, emails, and other materials that help support your legal defense. It is important that you gather this information and deliver it to your attorney as soon as possible, so they can present it to the judge and protect your interests. In Mexican law, there is no discovery. Therefore, all documents must be filed at the time of responding to the complaint; otherwise, you won’t be allowed to present the document afterward; however, there are some limited exceptions. Finally, it is important that you be prepared to attend court hearings and work closely with your attorney to present your case to the judge. This can include presenting legal arguments, presenting witnesses, and presenting documentary evidence. It is essential that you prepare adequately for these hearings and communicate with your attorney about any concerns you may have. In summary, if you are sued in Mexico, it is important to take quick and effective measures to protect your legal interests. You will need to: Carefully read the complaint. Consult an experienced attorney. In our firm we have a wide network of contacts, and we can help you choose the best lawyer, for the type of matter you have. Respond to the complaint within the established time frame. Provide relevant documents and evidence, and Be prepared to attend court hearings. By following these steps, you can increase your chances of success in the case and ensure that your legal rights and obligations are respected. If you need additional information, contact us. Email contacto@dha.mx or ignacio.ochoa@dha.mx

  • DE HOYOS AVILÉS obtains important victory in the Supreme Court of the Nation

    It is possible to seize assets of the Mexican Government The Supreme Court of Justice of the Nation authorizes the seizure of assets of the Mexican State. Summary of the facts: Our client is a people transport company. The Mexican Social Security Institute awarded him a contract to transport patients between various clinics and cities. With the passage of time, the IMSS stopped paying, accumulating a debt of almost ten million pesos. After several years of litigation and several appeals, a sentence was obtained condemning the IMSS to pay our client. But the payment never came. In the execution stage, our team requested the seizure of IMSS asset accounts to recover the debt. The judge denied the request for seizure based on article 4. of the Federal Code of Civil Procedures, which provides that "never" assets of the Mexican State may be seized. The refusal of the embargo was confirmed by an Appeal Court. Our team continued the battle with an appeal before a District Judge, who also denied the request. Finally, it was possible to take the case to the Supreme Court of Justice, claiming the unconstitutionality of article 4 of the Federal Code of Civil Procedures. The question presented before the Supreme Court of Justice was the following: Article 4 of the federal procedural law establishes that “never” may state assets be seized. Is this a total restriction? Is the right of access to justice violated with this restriction? Can the word "never" be interpreted in another way? The Court accepted our arguments, and making an advanced Constitutional interpretation, decreed that it is possible to seize assets of the Mexican State, in certain cases, even though the procedural law seems to say otherwise. The word "never" prohibiting the seizure of assets implies a violation of the litigants' right of access to justice. Therefore, the word "never" can have a different interpretation that allows the seizure of property, as long as it is not the property that the State uses to provide public services. What are the implications of this sentence? This criterion of the Supreme Court sets a significant precedent. In the past, providers of Mexican State agencies have had a great challenge to enforce contracts when the State fails. Even with a payment judgment in favor, the collection process was complicated, since the State delayed and evaded payment, knowing that their assets could not be seized. This precedent will allow the plaintiffs to proceed with the seizure immediately once they obtain a payment judgment against the State. Our litigation team in this case was made up of Jorge E. de Hoyos Walther, who led the case before the Supreme Court of Justice of the Nation, and Ignacio Avilés and Jaleyna de la Peña who were responsible for the long litigation to obtain the payment sentence. The full judgment was published on March 3, 2023, and can be found under file number 31298, file A.R. 144/2021.

  • 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: terry.cardenas@dha.mx

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