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Mexican companies with foreign investment are required to register in the National Registry of Foreign Investment (Registro Nacional de Inversión Extranjera, RNIE), which is under the Ministry of Economy, as well as to file notices in this regard. The most relevant aspects of this matter are the following: 1) At the moment of incorporation/entering a company: Include in the bylaws a clause regarding the admission of foreigners: At the beginning every company with foreign capital must include in its bylaws (the rules of the company), a clause of admission of foreigners, in which according to articles 27-1 of the Constitution and 15 of the Foreign Investment Law, foreigners agree to consider themselves as nationals regarding their participation in the company, as well as the activities carried out through the same and not to invoke the protection of their governments in this regard; under the penalty, in case of failure to comply with the agreement, of forfeiting to the benefit of the Nation, the assets/shares they have acquired by virtue thereof. 2) Within 40 (forty) business days from the incorporation or, as the case may be, entry into the company: notice of registration must be given to the RNIE. You can check if your company is registered in the RNIE, in the following link: https://datos.gob.mx/busca/dataset/registro-nacional-de-inversiones-extranjeras-rnie In the event that the filing exceeds the established term, the obligated parties will be subject to a penalty ranging from 30 to 100 UMA (Unidades de Medida y Actualizacion) per day. You can calculate your infraction at the following link: https://rnie.economia.gob.mx/RNIE/faces/sanciones.xhtml Requirements: Application Form for Registration in the National Registry of Foreign Investments. Original and Copy. Legal instrument that accredits the personality of the legal representative. Original and copy. Official Identification of the Legal Representative. Original and copy. Letter of authorization to carry out procedures before the RNIE (if applicable), it must be signed by an attorney-in-fact with powers to grant powers of attorney. Original and Copy. Official identification of the authorized person to carry out procedures before the RNIE. Original and copy. Proof of payment of fine (if applicable). Original and copy. Tax Identification Card issued by the SAT. Original and copy. Articles of Incorporation of the Company. Original and copy. Document that proves the income of the foreign investment. Original and copy. Document that proves the source of financing (if applicable). Original and copy. Document that proves the condition of stay in Mexico (if applicable). Original and copy. The process can be submitted electronically, by sending the requirements to the following e-mail address: inscripciones.rnie@economia.gob.mx., from 00:00 to 23:59 hrs. 3) File quarterly notices: Within 10 business days following the close of each quarter (January-March, April-June, July-September, and October-December). If any of the following changes are made: Name, denomination or corporate name. Tax domicile. Economic activity. or; If there are variations in any of the following accounts, greater than twenty million pesos ($20'000,000.00): Capital stock and/or shareholding structure that imply a change in the participation in the capital stock of foreign individuals or legal entities. Assets. Accounts receivable from Subsidiaries resident abroad, Partners or Shareholders resident abroad and/or Companies resident abroad that are part of the corporate group and that do not participate as partners or shareholders. Liabilities. Accounts payable to Subsidiaries resident abroad, Partners or Shareholders resident abroad and/or Companies resident abroad that are part of the corporate group and that do not participate as partners or shareholders. Stockholders' equity. Contributions for future capital stock increases. Stockholders' equity. Capital stock reserves or results of previous years. In the event that the presentation exceeds the established term, the obligated parties will be subject to a penalty ranging from 30 to 100 Units of Measurement and Actualization (UMA) per day. 4) File annual notice: If denomination/name starts from "A" to "J", during April; and, From "K" to "Z", during May. If the name or company name begins with a number or any other character, it must be filed during May. When any of the following accounts is greater than one hundred ten million pesos ($110'000,000.00): Initial total assets, Final total assets, Initial total liabilities, Final total liabilities, Revenues in the country and abroad or Costs and expenses at home and abroad #Mondayof #Legaltip #BLPAdvisors #Thelegalstartupforstartups

To establish a company, certain requirements must be met, which are as follows: Define the type of company: As previously discussed in publications, we consider there are three types of companies worth evaluating: Anonymous Company (SA): A very flexible company, similar to a SAPI, recommended for founders of a company if it will have minority shareholders. Investment Promoting Anonymous Company (SAPI): The most flexible of all companies, recommended if you are going to invest in a company as a minority shareholder, as well as for companies that intend to have investment from funds/sophisticated investors (since this is the structure they prefer most). Limited Liability Company (S de RL): This company is for closed companies (i.e., there will be no entry of investors/partners), with the advantage that it does not require a commissioner, simplifying the appointment of officials and works for companies that are controlled by American companies, as under American law, it allows operating as a transparent entity, meaning that profits and losses are reflected in the American company as if they were its own. Define partners/shareholders and contributions: In the case of SA and SAPI, the shareholders must be defined, their proportions in the company, and their investments. There is currently no minimum requirement to establish the company, so it can be established with $2. We suggest establishing it with $1,000, $2,000, or $50,000 in constitutive capital. The social capital is equivalent to the contributions made by the shareholders. This means that the constitutive capital indicated must be actually paid by the partners in favor of the company (we recommend making the corresponding deposits once the bank account is available). It is worth mentioning that contributions to capital (investments) do not generate either Income Tax or Value Added Tax. Once the constitutive capital is determined, the number of shares that will exist and their nominal value (minimum cost that must be paid for the subscription of a new share, that is, if new shares are created, the person who is the first owner of that share must pay for its purchase from the company, at least its nominal value) must be determined. It is most common for each share to have a value of $1, however, other values can be used. It is worth mentioning that the nominal value of the share can be omitted, in which case there will be no minimum cost for the subscription of new shares. To determine the percentage of participation of each shareholder/partner (in general terms), the number of shares or the value of the social part (in the case of S de RL) must be divided by the total number of shares or the social capital (in the case of S de RL). It is worth mentioning that the S de RL has a maximum of 50 partners. Define name, address, object of business, duration Name = Social Denomination Prior to the establishment, anyone must request the approval of the company's name through the corresponding Secretary of Economy's portal or through the notary/broker. (We suggest giving three options). Authorization takes three days. Address = Domicile Object of Business = Purpose of Company Duration = Length of Time Company Will Exist Identifying Members of Organs: Companies generally have three organs: 1) Shareholders/Supreme, 2) Administration, and 3) Surveillance. The supreme organ is the shareholders' assembly for the case of SA and SAPI, and the partners' assembly for the case of S de RL. This organ is composed of all the partners or shareholders of the company, provided they have the right to vote and can decide any matter related to the company. The administration organ consists of a manager (SA) or administrator (S de RL), or a board of directors (mandatory for SAPIS - minimum 2 members and optional for SA) or managers (S de RL). The managers/administrators can or cannot be partners/shareholders of the company, it is recommended that the majority be Mexican for the purposes of the company's tax residence (to have its administration in the country) and in theory, it is composed of those who run the company on a day-to-day basis. They are the epitome of the company and their powers depend on what the bylaws establish (where it can be established that they can act individually or, in some cases, that they must take all or some decisions together and appoint a delegate to carry them out). We recommend granting them: Power for administrative acts (ordinary acts that do not represent a detriment to the company). Power for litigation and collection (appear in controversies and collect debts). Power to grant powers (allows appointing attorneys without the need of a shareholders/partners assembly). Evaluate if granting: Power for acts of domain (allows acting as the owner) - We recommend it be joint (must be exercised together). Power for titles and credit operations. Power to open and close bank accounts, as well as to make deposits and draw against them. The surveillance organ is composed of one or a board of commissioners. The commissioner is mandatory for SA and SAPI, but optional for S de RL. Selecting the Broker or Notary to Establish Your Company: The constitution of the company must be carried out through a notary or public broker. The difference between the notary and the broker is that the broker can only act in commercial matters and is regulated at the federal level, while notaries can act in civil and commercial matters and their actions are regulated at the state level. A disadvantage of establishing before a broker is that they cannot grant powers (appoint representatives beyond the directors/administrators). We highly recommend notaries 180, 20 and 237 from Mexico City. The notarial cost of a constitutive is around $15,000. Defining the Bylaws Clauses: The bylaws of the company are the rules by which the company will be conducted, in addition to the points indicated in numbers 1-5, issues such as rules for the termination of the company, the rights of each class of shares, and/or preference rights for the purchase of shares are established. Some of the topics that we suggest including and/or taking into account: there is only a preference for new shares created by the company, not for shares sold by a shareholder. Joint sale right - If you want to sell, you must give me the option to sell the same proportion of my shares, otherwise you cannot sell. (SA and SAPI) Drag-Along Right - Possibility of making other shareholders sell together under certain conditions. (SAPI - It is not clear if it applies to SA) Non-competition right - It must be limited to a geographical area, to certain specific activities, and for a maximum of 3 years from the time they cease to be a shareholder. Increase and decrease in variable part - If no one has more than 50% of the shareholding or it is a closed company, it is recommended to establish that it can be carried out through an Ordinary Assembly, if you are an investor/minority, it is recommended to establish that it must be approved by an Extraordinary Assembly. Have a list of documentation and send it to the notary: General information of the shareholders will be required Tax ID card (also of spouse if married) Birth certificate (also of spouse if married) Legal residency in the country if a foreign national CURP, if applicable Shareholder identification. #TiplegalMonday #BLPAdvisors #Thelegalstartupforstartups

If you have a business and are considering incorporating a company in Mexico, you should consider the following: Incorporating a company offers shareholders advantages such as the ability to clearly organize the relationship between partners, differentiate between project assets and those of each investor/partner, provide certainty to investors, increase customer confidence, and maintain proper control of all business-related activities. It also allows you to take your business more seriously and formalize it. However, there is currently a simplified trust regime known as the "Simplified Trust Regime" (RESICO), applicable to individuals who earn a maximum of three million five hundred thousand pesos per year and perform any of the following activities: Business activities = commercial, industrial, or transportation. Professional activities = those requiring a professional title for their practice. Property rental. This regime has the advantage that only income tax is payable, ranging from 1% to 2.5% on the income received (without deductions), meaning for every $100 you earn, you pay between $1 and $2.5, regardless of how much you earn. This is in contrast to companies, which generally pay 30% on their profits (i.e. add up the income, subtract deductions/invoices and pay 30% on the remaining). Both the company and the individual in RESICO must pay 16% VAT on the goods or services they commercialize/provide. However, incorporating a company protects its shareholders, as they are only liable for the company's debts up to the amount of their contributions (investments). This means that any problems, debt, legal actions or risks faced by the company are not applicable to the shareholders personally (generally speaking), however, if a person provides/commercializes goods or services under RESICO, they assume all risks, problems and legal actions personally. Consider the following: Company cost: Incorporating a company approximately costs $15,000 plus your advisors' fees. Accounting: Both RESICO and the company must maintain accounting records, however, the records for an individual/RESICO are cheaper. Invoices: Both RESICO and the company must issue invoices for the income they receive. Retention: If you perform your professional activities as an individual through RESICO and contract with companies, they must withhold 1.25% of income tax and 2/3 parts of VAT, which represents a disadvantage, as you will not be able to claim these payments against your expenses (which companies can). Risks: As discussed, an individual who performs activities as RESICO is personally responsible for their business, meaning that if something goes wrong, they could be sued and their house could be seized, for example. Requirements for RESICO: To be registered with RESICO, you must provide/sell services/goods independently (not as an employee), not participate in any society as a partner/shareholder, not receive income equivalent to salaries, and earn less than $3,500,000 per year. Company Officials: If you want to open a company, you must appoint officials: Administrators/managers (At least 1 who can be a partner/shareholder, they manage the day-to-day operations of the company) and in the case of SAPI and SA Commissioners (Typically the accountant and they monitor the actions of the administration). Evaluate what is best for you. #Thursdayof #Legaldoubts #BLPAdvisors #Thelegalsartupforstartups

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BLP The legal startup for startups No hourly fees, no legal pains 90% NPS 7+ COUNTRIES 8+ YEARS OF EXPERIENCE We help entrepreneurs take care of their legal needs, through an affordable, efficient and high-quality solution. ACERCA DE PROYECTOS JOIN THE EASIEST LEGAL SERVICE At BLP, you will have an interdisciplinary team of experts who will help you carry out your legal needs. We don't work by hourly fees, instead, pay a flat fee and fulfil all of your needs. We are a combination of A+ attention (similar to a "traditional firm"), and the rapidness and close response that an internal lawyer could deliver. All of these for a fixed fee 3x more accessible than traditional fees. Day to day full legal solution We provide an end to end legal service. From the incorporation to the exit of your startup. No hourly fees Pay a monthly flat fee that covers all your legal needs. Specialized in Smes & Startups We understand your business and move with the speediness and quality that your startup requires. See all our included services SERVICIOS SOME OF OUR CLIENTS CLIENTES CONTACTO Our clients: "BLP Advisors has successfully resolved legal problems for several of the group's companies. It is worth mentioning the efficiency with which they respond to our requests in various matters. They have intervened with documents in other languages, with very positive results. We always receive a kind and respectful treatment we receive" - Gerardo Cortés Legal dir ector at Tadá CONTACT US Enviar

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