In accordance with Article 17 of the Foreign Investment Law (Ley de Inversión Extranjera, or LIE), foreign legal entities purporting to regularly perform commercial activities in Mexico, as well as those seeking to set up business in the country must obtain a permit or authorization for such purposes from the Secretariat of Economy (Spanish: Secretaría de Economía, abbreviated SE). As of August 9, 2012, by virtue of the General Resolution of said Secretariat, which shall be itemized below, the need to obtain said permit or authorization is no longer required if the following elements are combined.
Countries That Are Exempt
In order to fall under this exempt status, foreign legal entities must have been created pursuant to the laws of the following countries: The United States of America, Canada, Nicaragua, Chile, El Salvador, Costa Rica, Colombia, Guatemala, Honduras, Uruguay, Japan and Peru.
In order to realize this exemption, the legal representative or attorney-in-fact shall file a written legal document stating under oath the following information:
- That the corporate contract/agreement (or association agreement, articles of incorporation, or charter) and other incorporation documents are not contrary to “public order”*; having to name the main activity they purport to perform in national territory, same which must be according to the LIE.
- That the legal entity has been duly formed in accordance with the laws of the country of origin.
- In the case of foreign legal entities purporting to regularly perform commercial activities in Mexico, where said legal entities shall set up business in the country or shall have an agency or branch (as the case may be) in same, such shall provide the corresponding domicile.
- In the case of foreign private-sector legal entities, said legal entities shall have a representative domiciled at the place where they will be operating, such individual being authorized to formally respond to the obligations undertaken, having to provide the corresponding name and domicile.
For purposes of registration with the Public Registry of Commerce (Registro Público de Comercio or RPC) as set forth in Article 24 of the Code of Commerce (Código de Comercio) and Article 251 of the General Law of Commercial Corporations (Ley General de Sociedades Mercantiles) , vis-à-vis submitting the authorization, filing the above-mentioned written legal document properly stamped with the “received” stamp and showing the date of receipt, along with the corresponding folio granted by the SE, will suffice.
Foreign Legal Entities
With regard to the foregoing, important points are abridged vis-à-vis issues relating to the identified permits or authorizations when the exemption explained is not realized.
Types of SE permits or authorizations
This Agency regularly gives two types of permits or authorizations:
- one is applicable for legal entities to engage in commercial activities and be able to register their bylaws and other corporate documents in the Public Registry of Commerce. This is usually called a branch office
- Another is for foreign legal entitles that will not engage in commerce in Mexico, which is often called a representative office without income
Foreign Corporation Engaging In Commerce
In addition to the permit or authorization, the incorporating documents and said permit or authorization should be formally recorded in the book of Notarial records before a Notary Public and register the notarial instrument in the RPC.
Does a Permit or Authorization To Engage In Commercial Activities = Authorization To Have a Representative Office without Income?
This is not the same authorization, as one is exclusive of the other: If a corporation has a branch office authorization, it is because it performs commercial activities. Only when such are no longer performed and they are devoted solely to represent the interests of said corporation in Mexico can they apply for a new permit in order to become set up as a representative office without income.
Conversely, when a corporation has a permit or authorization for a representative office without income it cannot perform commercial activities, thus, if it purports to regularly engage in commerce, it should have a permit or authorization in order to register its bylaws in the RPC.
Other Points of Significance
A legal representative in Mexico can be a foreigner provided they are domiciled in the country and can verify their immigration status. This representative, be it a foreigner or not, is that person who can apply for permits or authorizations for setting up branch offices or representative offices without income, as long as they have a power of attorney granted before a notary public, regardless of whether said power of attorney was granted in Mexico or abroad (in the latter scenario, such must be apostilled** or duly authenticated [legalized] and translated in its entirety into Spanish by an expert translator).
Foreign corporations can perform all their corporate-purpose activities provided same are indicated in the written legal application document and such are authorized according to the LIE.
If a foreign corporation was set up in Mexico without obtaining a permit or authorization from the SE, authorization or permission must necessarily be applied for indicating in same as of when said corporation was set up in the Mexican Republic.
To set up different premises in different states of the country a simple authorization will suffice.
A foreign legal entity performing commercial activities must be registered with the National Registry of Foreign Investment (Registro Nacional de Inversiones Extranjeras, or RNIE) within a period of 40 business days from the date the foreign corporate documents were formalized or formally recorded in the book of Notarial records (Art. 32, LIE).
If the application for setting up a foreign corporation in Mexico is denied, it is possible to reapply or challenge/contest such decision either by resorting to an administrative review or by bringing suit demanding the nullity of the denial before the Federal Tax and Administrative Justice Court.
* Simply put, the term “Public Order” refers to all things that affect legal situations created for the benefit or security of all Mexican citizens and residents
** A way to legalize a document for international use under the terms of the 1961 Hague Convention
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