Common law permits the piercing of the corporate veil and acknowledges the alter ego theory. In Mexico, corporate law remains ambiguous on this matter. For years, trial attorneys, academics, and judges have held varying opinions on the issue. Over the past decade, Federal Circuit Courts have begun to establish precedents favoring the piercing of the corporate veil. However, it is only recently that the Mexican Supreme Court has addressed this issue, as earlier cases had not been brought before the high court. The Court recently published two precedents that allow the piercing of the corporate veil under certain conditions . The rulings also address taking such action as a precautionary measure in commercial lawsuits. Case law precedents are published as follows: Digital registry number 2029944. CORPORATE VEIL. IT SHOULD BE LIFTED AS AN EXCEPTIONAL MEASURE WHEN IT IS PROVEN THAT IT IS USED TO DEFRAUD THIRD PARTIES. Digital registry number 2029943. CORPORATE. AS A GENERAL RULE, ITS LIFTING CANNOT BE ORDERED AS A PRECAUTIONARY MEASURE IN A PRELIMINARY PROCEEDING. What is the corporate veil? The corporate veil is a legal fiction that offers protection to shareholders and is an integral aspect of any company. When individuals incorporate a commercial entity that meets all legal requirements, the company is deemed to exist as a separate legal entity with its own autonomy and independence. The principle of separating the corporate legal entity from its shareholders ensures that, under ordinary conditions, the actions of the entity do not impact the legal status of its owners, partners, or representatives. The corporate veil concept was created to limit individuals' liability to the extent of their financial contribution to the company. Piercing the corporate veil refers to disregarding the legal personality of a company when the entity has acted unlawfully to the detriment of third parties. In Mexico, the primary law governing the incorporation of companies is the General Law of Commercial Companies which provides that: Commercial companies have a legal identity distinct from that of their partners. (Article 2nd). Creditors of a specific shareholder can enforce claims on the profits earned by that partner from the partnership, but not on the assets of the partnership. (Article 23rd). As corporations grew, their activities became more complex, and some misused the corporate veil to evade responsibility. To counter this, legal measures were introduced to hold shareholders or representatives accountable for illegal activities, fraud, or breaches, leading to the concept of piercing the corporate veil. Piercing the corporate veil allows parties to: Disregard the partnership as a distinct legal entity. Remove the liability protection for the partners within the partnership. New case law argued before Mexico's Supreme Court. In February 2025, the Court examined two interconnected topics about piercing the corporate veil. One topic was identified as the principal issue, while the other was considered an accessory issue. In summary, the court concluded that: The corporate veil must be pierced when used unlawfully or to defraud third parties. As a restrictive measure, it should be considered exceptional and applied with prudence, clear and robust justification, and reliable evidence. Generally, corporate veil piercing is not permissible in a preliminary injunction proceeding. Supreme Court case opinions. In the cases, the Supreme court argued the following: The Supreme Court held that a key principle of corporate law is the separation of assets, meaning the company's assets and liabilities are distinct from those of its partners. The Court concluded that this separation ensures that the corporation's members are not personally liable for the company's debts beyond their capital contributions. If the company lacks solvency, members are only responsible up to the amount they have invested. The court found no clear provision for piercing the corporate veil or disregarding a company's legal identity. In specific circumstances, the principle of piercing the corporate veil may be invoked as an extraordinary measure. This action is based on good faith principles, preventing abuse of rights, and avoiding legal fraud. The exceptional application is intended to prevent the abusive use of a company's legal identity for the purpose of evading obligations or legal duties. By disregarding the separation of assets of the new entity, the aim is to determine the genuine social and economic identity of the company. This process clarifies the company's overall objectives or those specific to a particular business venture. The Supreme Court held that Mexican law includes mechanisms with effects similar to piercing the corporate veil. These include joint and several liability (Article 2 of the General Law of Commercial Companies), the controlling beneficiary provision (Article 3, Section III, of the Federal Law for the Prevention and Identification of Operations with Illicit Proceeds), and presumptions of actions in fraud of creditors (Article 117, Sections II, III, and IV of the Law of Commercial Bankruptcy). As it is a restrictive measure that contravenes the guarantee of legal certainty for the commercial company, its partners, and potentially other companies within its corporate group, piercing the corporate veil must be regarded as an exceptional action, utilized restrictively, and applied subsidiarily. Therefore, it should be executed with due caution and sufficient justification to set aside the principles underpinning company regulation. The Court determined that piercing the corporate veil requires consideration of both objective and subjective elements. Objective factors include the company's incorporation, structure, governance, and any debt or obligation breaches. Subjective elements involve the context where the company was incorporated with the intent to deceive third parties or where the corporate veil is used to misrepresent actions or commit fraud against third parties. Conclusions. The recent cases decided by the Mexican Supreme Court, along with an accumulation of rulings from Federal Circuit Courts, form the foundation for case law direction regarding the abuse of legal personality and the separation of assets between partners and the company. In contemporary practice, it is imperative for corporate lawyers to ensure that corporations adhere to corporate regulations, as failure to do so may result in the invocation of the corporate veil doctrine. If you have any questions, please contact Jorge E. de Hoyos Walther , Chair of our litigation practice group ( Jorge.dehoyos@dha.mx ) or Carlos de Hoyos Walther Chair of our Corporate practice group ( carlos.dehoyos@dha.mx ) This note is for informational purposes only and does not constitute legal advice. Jorge E. de Hoyos Walther Carlos de Hoyos Walther

On January 13, 2025, Mexico’s President Claudia Sheinbaum introduced the highly anticipated "Plan Mexico", an initiative focused on addressing economic stability, national security and public safety. Plan Mexico seeks to introduce multiple legal reforms, highlighting a boost to foreign investment, improvement of infrastructure, and fostering sustainable growth. Plan Mexico aims to: Place the country among the top ten global economies. Raise the ratio of investment to GDP to over 25% by 2025 and 28% by 2030. Create 1.5 million jobs in specialized manufacturing. Increase the domestic content in global value chains in the automotive, aerospace, electronics, semiconductor, pharmaceutical, chemicals, and biotechnology industries. The main actions through which the Mexican government plans to encourage investments are: Substantial funding towards infrastructure development. Digital transformation, technology innovation, data analytics and cybersecurity. Modernization of the transportation, telecommunications, and energy sectors. Tax incentives for businesses investing in underserved regions and strategic industries. Expansion of social security benefits and healthcare services. Reduction of investment process timelines from 2.6 to 1 year, with 50% less paperwork and requirements. Promote corporate environmental sustainability, including water and clean energy. Enablers as the IMMEX Program 4.0, the Nearshoring Decree, the National Simplification and Digitalization Law, and a Development Bank. IMMEX Program 4.0 The IMMEX program refers to the Maquiladora Export Program. It is a government initiative designed for companies to set up manufacturing operations in Mexico, particularly for export purposes. It works under foreign investment, duty-free importation, employment and economic benefits. Plan Mexico approaches IMMEX for the consolidated processing of the current Value Added Tax (or its acronym in Spanish, IVA) Certification and Special Tax on Production and Services (IEPS) Certification -both of which are incentives that favor operational cash flow- with a new Export Manufacturing 4.0 Program within the Ministry of Finance, that will reduce the start-up time of a new company by 50%. Nearshoring Decree Pursuant to the Plan’s timeline, this decree was published on January 21 and sets policies and regulations to attract foreign companies incentivizing them to relocate their production or supply chains to Mexico. The decree aims at maximizing the competitive advantages in the country. Plan Mexico envisions immediate deduction of new investments in incremental fixed assets, applying the highest percentages to investments in high technology sectors, research and development; not distinguishing between foreign and Mexican companies, industry or sector. And an additional deduction of 25% of the incremental expense to train its workers in connection with education and research institutions. Development Banks The country’s development banking institutions will seek innovation by supporting supply chains of scale and specialization, as well as reverse factoring flow estimating the risk of the anchor company -with sales between $100 and $500 million dollars annually- and not of the Micro, Small and Medium Businesses. Companies will need to closely monitor any legal changes under Plan Mexico that could impact corporate operations as tax, labor, environmental, and health regulations. This project will be published through different stages over a period of four months ending in April 2025 and expecting a consolidation of the goals for the year 2030. We encourage investors to stay informed regarding new laws and regulations, or announcements of public investment projects or incentives, emerging from Plan Mexico. Engaging with local legal counsel can proactively adjust the operational frameworks to remain compliant with the Mexican law and take full advantage of the benefits that this initiative offers. Should you have any questions or inquiries regarding Plan Mexico and the related legal framework, do not hesitate to reach out. Luis Armendariz luis.armendariz@dha.mx Jehiel Rosales reyna.rosales@dha.mx

The Convention on the Elimination of All Forms of Discrimination against Women ("CEDAW"), ratified by Mexico in 1981, establishes an international framework to eradicate discrimination against women in all areas, including the workplace. This treaty, in addition to being an ethical and political commitment, has concrete legal implications that transform the way in which companies and organizations must operate in Mexico. CEDAW provisions that are integrated into the Mexican legal framework. The ratification of the CEDAW obliges the Mexican State to incorporate the principle of equality and non-discrimination in its labor legislation. Among the main regulations that reflect this commitment are: Federal Constitution. México Constitution provides equality as a fundamental right in Article 1, which prohibits discrimination based on gender, ethnic origin, age, and disability, among other factors, and also in Article 123, which recognizes universal labor rights and ensures equal working conditions for men and women. Federal Labor Law ("LFT"). The LFT establishes multiple provisions related to gender equality, such as equal pay enshrined in Article 86, which states that equal work must correspond to equal pay, regardless of gender. Likewise, Article 3 prohibits labor discrimination based on gender and promotes equal opportunities. Article 170 protects pregnant workers with pre- and post-natal leave and breastfeeding breaks, and Article 47 includes sexual harassment as a cause for termination of the contract, protecting the victims. General Law for Equality between Women and Men ("LGIMYH"). It establishes guidelines to guarantee substantive equality in the workplace, obliging employers to offer equal conditions free of discrimination. NOM-035-STPS-2018. This official Mexican standard regulates psychosocial risk factors in workplaces by requiring policies to prevent workplace violence and harassment, problems that undoubtedly disproportionately affect women. Legal implications for companies. Compliance with these regulations is not optional; thus, Mexican companies are subject to inspections, economic sanctions and possible labor litigation if they fail to comply with provisions related to gender equality. The main legal implications include: Responsibility in the face of employment discrimination. Companies have the obligation to guarantee equal access to employment, salaries and professional development opportunities. Situations of gender discrimination such as refusing to hire pregnant women or assigning them lesser responsibilities may result in fines and lawsuits before the Conciliation and Arbitration Board (Labor Courts). Mandatory protocols against sexual harassment. The LFT and the General Law on Women's Access to a Life Free of Violence ("LGAMVLLV") require companies to implement protocols to prevent, address and sanction cases of workplace harassment. As mentioned above, not having these tools in place can generate administrative liabilities and reputational damage. For more on this topic, see our article "The importance of due compliance with employer obligations". Certifications and accreditations. Accreditations and certifications that are voluntary, such as the NMX-R-025-SCFI-2015 certification on labor equality and non-discrimination may be required in public tenders and are valued by clients and investors. Recommendations and business strategies to comply with Mexican legislation. To align with the Mexican legal framework and CEDAW obligations, companies must adopt practices that promote healthy and equitable work environments based on merit: Equality audits. Conduct internal evaluations to identify possible salary gaps, biases in hiring processes or inequalities in promotions. Protocols against workplace violence. Develop and implement clear protocols for the prevention and attention of cases of harassment and discrimination. This includes anonymous reporting lines and staff training at all levels. Work-family reconciliation policies. Introduce flexible schedules, teleworking, and benefits such as childcare, paternity leave and extended maternity leave. Training and awareness-raising. Training staff on issues such as gender equality and prevention of harassment. Obtaining certifications. Obtain NMX-R-025-SCFI-2015 or similar certifications to demonstrate commitment to equality and build trust among employees and business partners. Challenges and opportunities. Compliance with these regulations is not optional; thus, Mexican companies are subject to inspections, economic sanctions and possible labor litigation if they fail to comply with provisions related to gender equality. The main legal implications include: Responsibility in the face of employment discrimination. Companies have the obligation to guarantee equal access to employment, salaries and professional development opportunities. Situations of gender discrimination such as refusing to hire pregnant women or assigning them lesser responsibilities may result in fines and lawsuits before the Conciliation and Arbitration Board (Labor Courts). Mandatory protocols against sexual harassment. The LFT and the General Law on Women's Access to a Life Free of Violence ("LGAMVLLV") require companies to implement protocols to prevent, address and sanction cases of workplace harassment. As mentioned above, not having these tools in place can generate administrative liabilities and reputational damage. For more on this topic, see our article "The importance of due compliance with employer obligations" Certifications and accreditations. Accreditations and certifications that are voluntary, such as the NMX-R-025-SCFI-2015 certification on labor equality and non-discrimination may be required in public tenders and are valued by clients and investors. Challenges and opportunities. Although Mexico has made significant progress in implementing its obligations under the CEDAW, challenges remain in the country, such as gender pay gaps, low representation of women in senior management positions, and the prevalence of harassment and workplace violence. However, companies that adopt these measures not only avoid legal risks, but also benefit by improving their reputation, attracting the best talent and increasing their competitiveness in an environment that increasingly values the merits and contributions of the female sector. Prevention tasks are key to avoiding incidents that could damage the company's reputation or even result in fines from the authorities. Conclusion. CEDAW has been a key catalyst for the development of gender equality policies in Mexico, and its impact in the labor sphere is undeniable. Complying with the legal provisions derived from this treaty is not only an obligation for companies, but an opportunity to build better working environments. The effective implementation of these measures will allow not only to respect women's rights, but also to transform organizational dynamics towards a more efficient and prosperous future. Our labor law practice team has years of experience in preventing these types of incidents. At our firm, we are proud to have a dedicated practice group composed entirely of highly skilled women. These experts specialize in helping companies comply with the Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW). Our team is adept at conducting thorough internal investigations and providing comprehensive legal guidance to ensure that your organization adheres to the highest standards of gender equality and anti-discrimination practices. With their extensive experience and deep understanding of CEDAW, our practice group is committed to fostering a safe and equitable workplace for all. If you need more information, please write to us at contacto@dha.mx

On December 24, 2024, the decree that reforms the Federal Labor Law ("LFT") focused on the regulation of employee rights of digital platform workers was published in the Official Gazette of the Federation. This reform significantly modifies labor relations in a sector characterized by flexibility to workers . The reform adds Section VI to Article 49; Section IV to Article 50; Section IX to Article 127; and includes a Chapter IX Bis, called "Work in Digital Platforms", which includes Articles 291-A to 291-U. Article 997-B is also incorporated to the Federal Labor Law. This regulation will become effective 180 days after its publication. Who will have legal recognition and new labor rights? The reform establishes for the first time a legal framework that recognizes digital platform employees as subjects of labor rights. Article 291-A indicates that work on digital platforms will be regulated by labor law, and defines it as " a subordinate labor relationship consisting of the performance of remunerated activities that require the physical presence of the employee for the provision of the service , which are managed by an individual or legal entity in favor of third parties through a digital platform, using information and communication technologies to exercise command and supervision over the employee." In what cases are Digital Platform Workers considered self-employed? An employee of digital platforms is the person who provides personal, remunerated and subordinated services, and generates monthly net income equivalent to at least one month’s minimum wage of Mexico City for their work, regardless of the time actually worked. On the other hand, that person will be considered as self-employed if at the end of each month she is not able to generate the aforementioned income. Final salary, vacation, profit sharing, and other benefits for Digital Platform Workers Due to the flexible nature of the work provided, the salary set for the task, service or work performed will already include the proportional payment of benefits. Such as weekly rest day, vacation, vacation premium, Christmas bonus and overtime, being expressly stated in the Law that the payment or recognition of an additional amount for any of these concepts will not be applicable. What is the effectively worked time for Digital Platform Workers? Pursuant to Article 291-D of the Federal Labor Law, work on digital platforms will be primarily flexible and discontinuous; therefore, it will be understood that an employment relationship exists during the time actually worked by the digital platform employee. Work time effectively worked shall be understood as the time from the moment the employee accepts to provide a task, service, work, or job in the digital platform, until the moment in which such service is definitively concluded. The period of time indicated in Section IX of Article 127 of the Law shall be computed by considering the work time in 45 minutes for each hour and 15 minutes of waiting time for the reception of tasks and services and works . This translates into a factor of 0.75 of activity actually worked for each hour. Social security for Digital Platform Workers Provided that the person complies with the requirement to be considered as a digital platform employee, i.e., that he/she generates a net monthly income of at least one minimum monthly wage , the employer is obliged to register him/her as an employee with the Mexican Social Security Institute and withhold and pay the corresponding employer contributions, including those payable to the Mexican Workers Housing Fund Institute (INFONAVIT). The company through which the service is rendered at the time of any labor accident will be responsible for payment of the insurance under the social security system, which will be applicable to the effective working time in accordance with the calculations established in the LFT. Fines and penalties Article 997-B includes fines and penalties for non-compliance with labor protection regulations in digital platforms employment that can reach up to 25,000 UMAS (an economic measurement unit which as of this date equivalent to approximately US $66,000), historically, the second-highest fine that can be imposed on an employer for non-compliance with its obligations. Reinstatement in case of termination. Section VI of Article 49 of the Labor Law is added to include employees of digital platforms in cases in which the employer is exempt from the obligation to reinstate the employee in the event of termination of the labor relationship, except in cases in which collective rights of the employees have been violated. International context for Digital Platform Workers The modification to Mexico's labor law aligns with a growing global trend to provide better protections for digital platform employees. Here's a comparison with some other countries: European Union: The EU has been proactive in regulating gig economy employees. The European Parliament passed a directive in 2019 that ensures that platform employees receive transparent and predictable working conditions. Some countries, like Spain, have enacting laws that classify food delivery riders as employees. United Kingdom: The UK has a mixed approach. While some court rulings have granted gig employees employee-like rights, such as minimum wage and holiday pay, the overall regulatory framework still treats many as self-employed. United States : The situation varies by state. California's AB5 law, for instance, classifies many “gig workers” as employees, but this has faced pushback and led to Proposition 22, which allows companies like Uber and Lyft to classify their drivers as independent contractors while providing some benefits. India : India is in the early stages of regulating gig work. The Code on Social Security, 2020, includes provisions for social security benefits for gig and platform employees, but implementation is still evolving. Argentina: Argentina has also started to recognize the rights of gig employees. In 2020, the government mandated that delivery platforms provide insurance and other benefits to their employees. Overall, Mexico's new law is part of a broader movement to ensure that digital platform employees receive fair treatment and benefits, similar to traditional employees . This trend reflects a growing recognition of the importance of protecting employees in the gig economy. How do you think these changes will impact the global gig economy? This notice is for informational purposes only and does not constitute legal advice. A lawyer should be consulted before making any decision. If you have any questions, please contact us at contacto@dha.mx

Legal considerations of nearshoring in Mexico for US companies. Acquiring property should be done carefully, making sure to perform thorough due diligence to ensure clear title to the property that complies with local zoning laws . And most real estate transactions must be formalized before a notary . Environmental Regulations. United States companies must also comply with Mexican environmental laws and regulations , which may affect site selection and operations, and plan for an environmental impact assessment that may be necessary for certain types of industrial activities. Normative compliance. There are a number of industry-specific regulations , such as health and safety standards, that are enforced by various federal and local agencies. Anti-corruption laws. We recommend that US companies implement robust compliance programs once established in Mexico, to comply with the anti-corruption laws of both countries such as the FCPA and Mexican anti-corruption legislation. Dispute resolution. Understand the Mexican legal system and the mechanisms for resolving disputes, including litigation and arbitration, which are becoming increasingly complex . Nearshoring in Mexico has become increasingly popular for US companies looking to relocate part of their production or services . Relocating a U.S. company to Mexico involves several legal aspects that must be taken into account to ensure compliance with both U.S. and Mexican laws . Some of the most important legal considerations are: Due diligence. In order to prevent risks and legal challenges, companies should consider differences in legal systems and practices through due diligence , including understanding local procedures, infrastructure availability, different terminology and contractual meaning, to name a few. some. Corporate Structure and Registration. Choosing the appropriate legal entity to operate in Mexico, such as a subsidiary, branch or joint venture, must be done carefully. The most common entities are: a) Sociedad Anónima (“SA”) , which is a public limited company with at least two shareholders, where liability is limited to the amount of the shareholders' contributions, and b) Limited Liability Company (“S. de RL”) , which is suitable for smaller companies with limited partners. Incorporation Process. This process consists of writing and signing the articles of incorporation that include the corporate bylaws and are signed before a notary public and the company must register in the Public Registry of Commerce (“RPC”) as well as obtain a federal taxpayer registration number (“RPC”). RFC”) of the Tax Administration Service (SAT) of Mexico. Permissions and licences. It is crucial to obtain the necessary permits and licenses to operate legally in Mexico , which can vary by industry. The permits and/or licenses can be a) Federal, State and Municipal Permit, depending on the nature of the business, several permits from different levels of government may be required and b) Operating License which are generally obtained from the local municipal authority. Labor Law Considerations. Labor law and compliance is one of the most important topics that foreign companies should know about. Labor legislation includes Social Security regulations , workers' participation in company profits ("PTU"), employee benefits , working hours that must comply with recent reforms regarding labor exploitation. , the payment of the minimum wage, negotiations with unions , the prohibition of subcontracting and the housing fund for workers . When it comes to hiring qualified labor, companies that intend to employ subcontractors must confirm that the services they are outsourcing in Mexico are not part of their main business , since, in Mexico, subcontracting is regulated to ensure that it is not results in the avoidance of labor obligations. The main requirements and legal aspects of subcontracting are regulated in the Federal Labor Law (“LFT”), which is the primary legislation governing labor relations in Mexico, including subcontracting. In April 2021 there were important reforms to the LFT and related laws to more strictly regulate outsourcing practices. This law prohibits the subcontracting of personnel and companies can no longer employ workers through an external service provider to perform tasks that are part of their primary economic activities. Exceptionally, subcontracting is permitted for specialized services or works that are not part of the company's core business activities . Companies that provide specialized services must register with the Ministry of Labor and Social Security (“STPS”) and obtain a registration certificate (REPSE). The registry is public and accessible online. Among the most important practices that should be taken into account is that subcontracting agreements must be in writing and specify the nature of the services or specialized works. The registration number of the service provider and the obligations of the parties, subcontractors must comply with all labor and social security obligations and provide evidence of compliance to the contracting company. A key issue is that the contracting company is jointly responsible with the subcontractor for labor and social security obligations. For subcontracting purposes, there are a series of Information requirements, such as reporting your subcontracting agreements to the Mexican Social Security Institute (“IMSS”) and the National Housing Fund for Workers (“INFONAVIT”). This includes detailed information about subcontracting contracts and the workers involved. Companies must also submit annual reports to the STPS detailing their subcontracting activities, ensure compliance with mandatory benefits, including social security, vacations, profit sharing and severance pay, and be aware of the role of employees. unions in Mexico and the potential of collective bargaining contracts . Taxation . Companies seeking to relocate their operations to Mexico should obtain expert advice regarding the Mexican corporate tax rate, as well as tax obligations, including Value Added Tax (“VAT”), income tax and other applicable taxes. . It is also advisable to have appropriate advice to ensure compliance with transfer pricing regulations to avoid penalties and ensure that transactions between related entities are carried out at arm's length. Companies can benefit from tax treaties between the United States and Mexico to avoid double taxation on income. Intellectual property . In Mexico there are important regulations for the protection of intellectual property , in this sense, companies must register trademarks, patents and copyrights in Mexico and ensure that intellectual property transfer and license agreements comply with Mexican legislation. Customs and Trade Regulations. With the enactment of the Agreement between Mexico, the United States and Canada (“T-MEC” or “USMCA”) , Mexico improved its offer to foreign manufacturers by providing legal certainty to nearshoring projects. There are several relevant business regulations when developing this type of project that you should keep in mind. Foreign companies can benefit from government maquila programs , so it is important to understand the regulations for importing raw materials and exporting finished products, including tariffs and non-tariff barriers. Taking advantage of the USMCA allows companies to obtain preferential trade terms and compliance with their rules of origin. Property. Foreign companies must consider the requirements and obligations within the legal process of acquiring or leasing properties that are increasingly common in the country. Data Protection. Companies must comply with Mexico's data protection regulations, including the Federal Law on Protection of Personal Data Held by Private Parties (“LFPDPPP”) and ensure adequate protocols for the transfer of data between Mexico and the United States, adhering to the privacy laws of both countries. Logistics and Supply Chain. We recommend that companies draft contracts with suppliers and logistics providers that clearly define responsibilities and risk management, and that they implement strategies to manage the risks associated with cross-border supply chains, including political and economic risks . Recommendations and conclusion. There are many advantages for a North American company to move its operations to Mexico, however, when looking to have cheap and qualified labor, American companies must be aware that the legal framework for subcontracting in Mexico is strict , especially after the 2021 reforms. U.S. companies must carefully navigate these regulations to ensure compliance and avoid potential liability. De Hoyos Aviles has an experienced group of lawyers and experts who can assist you immediately. For any questions, you can write to us at contacto@dha.mx

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

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.

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.

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.

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.

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

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