Directors’ Duties in Mexico

>> Powers and Duties in Mexico

You must act within the powers granted by the shareholder meeting, the company’s by-laws and the General Law of Corporations.

Duties – Skill and Care

When exercising directors’ powers, you are required to exhibit a degree of skill, care and diligence as would be reasonably expected from a person with your knowledge and experience.  You have a duty to represent the company pursuant to the shareholders meeting instructions.

Duties – General

As a director you must act in a way that you think is most likely to promote the success of the company.  You need to consider a number of statutory factors relating to corporate requirements, including the long term consequences of your decisions, the company’s reputation and the interests of other stakeholders such as employees, customers and the community.

  • you must report and inform the shareholders regarding activities of the board in each year
  • you have a duty to verify the authenticity of any contributions made by shareholders to the company
  • you also have a duty to declare any conflicts of interest. In some cases the conflict can be noted and you can remove yourself from any decision making within the entity upon the relevant matter. However if the conflict is of a more fundamental or continuing nature then you may need to resign your position. If in doubt, seek advice
  • you have a duty to fulfil the legal requisites stated in the company’s by-laws and the laws with respect to the distribution of dividends
  • you have a duty to verify the existence and maintenance of accounting, control and recording systems as stated by the applicable laws
  • you have a duty to verify that the company is in compliance with all its filing requirements before different governmental agencies
  • you have a duty to verify that all shareholders’ or partners’ resolutions are fulfilled and complied with
  • you have a duty to create a legal reserve fund by separating at least 5% of the net profit every year until such fund reaches 20% of the corporate capital

Duties – Other

There are many other areas of law that impose duties on directors and senior managers.  Matters likely to be of particular relevance, depending upon the nature of the entity and its activities, are set out below:

  • you must comply with tax obligations according to the applicable tax provisions. For example, directors are jointly liable with the Company for taxes which are not paid and cannot be guaranteed or paid with the Company’ assets. In addition directors will  be liable alongside the company in the  following cases:
    • if the Company has not obtained its Tax ID number
    • if the Company changes its tax domicile and does not notify the tax authorities
    • if the Company does not complete its accounting records, hides them or destroys them for any reason
  • you are responsible for taking all necessary actions under various health, safety and environmental regulations in Mexico. For example, companies must obtain authorisation for certain actions
  • companies must implement specific storage programs for operating machinery and materials to avoid risks to employees. Although the laws and regulations on this area do not specifically provide for liability for directors, you may be liable for damages when regulations are not met. Any serious accidental injury or environmental breaches must be reported in accordance with the company’s policy.  Directors can be held personally liable if the company illegally produces, stores, imports, exports, transports, or discharges hazardous or toxic substances
  • you are responsible for complying with AntiMoney Laundering regulations in Mexico. These can vary according to commercial areas and industries. For example, the government requires certain transactions to be notified in advance when the value involved reaches certain limits. Depending upon the transaction at hand there may be further steps to complete before entering into the agreement
  • like all of the company’s employees, you must comply with Anti-Bribery and Corruption legislation, and you must understand, follow and promote the company’s internal policies and procedures
  • you must comply with all competition laws and regulations. For example, agreements with competitors to fix prices, and obstructing, diminishing, harming or impeding the free market are illegal under Mexican competition laws. Punishment for a breach of competition law can be a fine equivalent to up to $900,000, and banishment from holding a directorship for up to 5 years
  • generally our corporate secretarial provider will maintain our statutory records but directors have a duty to ensure certain records are maintained although not necessarily within the premises/offices. For example, directors are required under the General Law of Corporations to submit a report to the annual shareholders’ meeting relating to the company’s business in the previous year, and submit the corresponding financial statements for approval. Therefore it is essential that directors ensure proper corporate and accounting records are kept
  • any director using or responsible for the use of data must ensure that data is only used according to the owner’s instructions, is not used for purposes not authorised by the company and that the data is deleted once the purposes for which it was obtained are completed. A director in breach of Data Protection Law could be fined up to $1,400,000. There are certain activities that are considered crimes and will be sanctioned with a prison sentence from six months to five years depending on the case, for example using personal data to obtain an illegal economic benefit through misleading activities and false information given to the data owner

In addition, all directors should ensure the Company complies with the following obligations:

  • only use data according to the owner’s instructions
  • do not use data for unauthorised purposes
  • implement security measures according to applicable legal norms and regulations in order to secure the data
  • delete personal data once the purpose for which it was obtained has been completed, or when the Company instructs so
  • do not transfer data except as instructed by the Company or a competent authority

Latest version updated 4th April 2018

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