Corporate legal considerations in Mexico: Anticorruption and Compliance as part of Corporate Governance

By: Luis Gerardo Ramírez Villela

Corporate governance is fundamental in all corporations on a worldwide basis for the correct business operations and involves balancing the interests of the stakeholders of each corporation and furthermore comprehends the standards used by all corporations to pursue integrity and accountability in its business operations.

Having an internal corporate governance framework requires every employee to understand the importance of safeguarding sensitive data and confidential information, as well as carrying out orderly and organized business activities within any organization.

By following best practices in corporate governance, any corporation will be able to maintain effective internal control processes and avoid corruption practices and breach of internal and external applicable laws and regulations.

In Mexico and besides the specific provisions of the articles of incorporation and corporate bylaws, the Mexican General Law of Commercial Corporations (Ley General de Sociedades Mercantiles) contain the main corporate governance principles.

Likewise, other applicable laws related to anticorruption that would apply would include, without limitation, the Mexican General Law of the National Anticorruption System (Ley General del Sistema Nacional Anticorrupción), the Mexican General Law of Administrative Responsibilities (Ley General de Responsabilidades Administrativas) and some other specific laws related to the specific industrial sector of each corporation.

Considering that corporate governance involves stakeholders such as employees, managers, shareholders, and investors, all of them will be required to take active roles in learning the internal and external regulations applicable to the nature of business activities of each corporation and therefore it is necessary to implement specific internal supervision mechanisms for tracking and reporting misconduct actions.

Some typical solutions would consist in (i) performing internal and external periodical due diligence processes to identify how the areas are working together and any potential risks which could have an impact on the business operations, (ii) creating clear communication lines for external and internal stakeholders to communicate any concerns from an accounting, legal or operative natures and ensure that the compliance officers appointed for such purposes by the board of directors address such problems before they escalate into more significant issues, and (iii) implementing evaluations and questionnaires to verify knowledge of internal and external regulations.

The above, notwithstanding the implementation of code of conduct and ethics, compensation, and risk management, as well as other strategic internal regulations, such as environmental, foreign trade, etc.

It might also be advisable to create specific workshops with external advisors on each specific topic to be imparted periodically to its stakeholders. With all these steps in place every corporation could be preventing fraud and corruption acts that could impact their business operations.

It should be noted that having a good corporate governance will result in a successful business operation with transparent rules and controls that will lead its stakeholders and the corporation itself to leadership and recognition within its industrial sector.

Restructuring

Müggenburg, Gorches and Peñalosa's restructuring practice includes representation of corporate debtors, hedge funds, in various industries, etc., in restructuring proceedings and bankruptcy equivalents (insolvency proceedings).

Mergers & Acquisitions

We provide services in acquisitions, sales, mergers, spin-offs, reorganizations and co-investments, representing national and foreign clients operating in various industrial and commercial sectors.

Corporate /Transactional

At Müggenburg, Gorches y Peñalosa we provide legal services in all aspects of corporate law practice. Our group of professionals in this area has years of experience providing services to both national and international clients, with the most diverse needs and the highest standards of demand and sophistication in the service. Among our clientele are leading companies in their sectors worldwide, such as automotive, cosmetics, hotels and tourism, food industry, aeronautical industry, computer programs and systems, suppliers of the oil industry, technology, among others.

We advise our clients on the constitution of Mexican companies (commercial and civil) and associations, attending to the needs derived from the industry and/or commerce segment in which they focus their activities and their medium and long-term plans, also providing services for compliance with the regulatory requirements that may apply, including those derived from direct foreign investment, economic competition and obtaining the necessary licenses and permits for its operation. Our services also extend to the provision of corporate services within the ordinary course of business of our clients, including advice on the preparation, review and negotiation of all types of civil and commercial contracts, and the custody, updating and maintenance of corporate books. . We also provide services related to the opening and management of branches in Mexico of foreign companies.

We represent national and foreign corporate and/or investment groups in the acquisition of, and/or merger with, Mexican business entities, and on other occasions we also represent acquired Mexican entities. In both cases, we provide legal audit services to foresee possible contingencies of the operation, locate areas of opportunity and help determine the value of the company to be acquired. Likewise, in representing the acquirer, we prepare the legal documentation of the operation (specifically contracts for the sale of shares and/or association, with all its annexes and accessory contracts), and we carry out their negotiation with the counterparty. Likewise, in these cases we participate directly in the processing and obtaining of any authorizations, permits, licenses and concession titles required for the operation of our clients, and we advise on notices and notifications to government entities, including notifications of resolutions and opinions of the Federal Economic Competition Commission.

We provide advisory services for corporate restructuring and reorganization, also including international corporate groups with a presence in Mexico. In these cases we have worked in coordination with groups of financial and accounting advisors both from Mexico and abroad, and we have coordinated legal audits of subsidiaries of entities acquired in several Latin American countries (Argentina, Brazil, Chile, Colombia and Peru, among others, with local legal advisers in each case).

We advise on operations of association in participation, "joint-ventures", preparation and negotiation of agreements between shareholders, merger and spin-off of legal entities, establishment of trusts of any type, constitution of guarantees on any type of property, repurchase of shares by of companies listed on the Mexican Stock Exchange, as well as in the structure of purchase option plans and other types of specialized corporate operations.

We also provide services for the development of mechanisms that allow the efficient and effective anticipation and management of potential conflicts between shareholders; in this regard, we have represented groups of shareholders of Mexican companies in the implementation of corporate actions to defend their interests against the rest of the shareholders and the Company itself on internal corporate control issues, generally in coordination with litigation areas in matters commercial and civil.

Depending on each particular project or operation, we rely on other specialty areas of the Firm, in order to provide comprehensive services, under the highest standards of quality and efficiency.

Mergers & Acquisitions

We provide services in acquisitions, sales, mergers, spin-offs, reorganizations and co-investments, representing national and foreign clients operating in various industrial and commercial sectors.

Restructuring (Corporate and Financial)

Müggenburg, Gorches and Peñalosa's restructuring practice includes representation of corporate debtors, hedge funds, in various industries, etc., in restructuring proceedings and bankruptcy equivalents (insolvency proceedings).