Western Maquila Association Legal Compliance for Maquiladoras Adrián Ocampo, Esq.

In Mexico diverse legislation establishes certain general obligations for all corporation an business entities. Most of the obligations are legal issues and must be perfomed in order to keep the companies good standing. Failure to compy with legal obligations can lead to fines imposed by diferent autorities. Importance of legal Corporate Compliance.

Stockholder Meeting to approve financial Statements for According to article 8A, and its related articles 78 and 178 of the Commercial Entities Act, all business entities must approve the financial statements for every ending corporate year, because the tax year ends at December 31 and the yearly tax declaration is presented in March, it is convenient to hold the meeting after the taxes have been filed to approve the financial statements for the previous year 2008 and to record such meeting in the companies corporate books. Likewise, issues such as a change of address, profit payment, revocation or appointment of executives, stock acquisition, transformations, liquidations, mergers among others, stated in such law and in the corporate bylaws, must be discussed, approved by the stockholders and subsequently duly recorded for all legal effects to take place.

Tax Id of foreign stockholders. Federal Fiscal Code clearly states that the stockholders of entities must request their registry before the Federal Taxpayers Registry and abide by compliance notices, as with the obligation of keeping the accounting books. In connection with the obligations mentioned in articles 27 and 28 of the Fiscal Code, accounting records as well as corporate records form part of the tax documents that each taxpayer must possess and keep updated. Therefore in case of a compliance inspection by the authority, such authority could impose sanctions when these obligations are not duly complied with.

STOCK CERTIFICATES For some types of commercial entities certain special rules exist, same that must be observed, such as the issuance of stock certificates duly updated. On occasion, the company has endured several sales and acquisitions of stock in its capital and does not possess formal documentation required by law in order to consider such transfer formally carried out. Section Two of Chapter V of the Commercial Entities Act. It is also important to consider that the corporate updating of your company protects your family in case of death, this way the heirs may in an objective manner, manage the business or have a determined base to sell the assets. When the company is to be sold or liquidated, having your company corporately updated saves you time and money when decision making and on document review by the buyer.

Regarding Foreign Investment, all maquiladoras must obey the annual renewals starting in April of each year filing an economic report. Depending on the company name, the renewals are filed at a different month. Articles 37 and 43 of the Regulations of the Foreign Investment Law. The notices must be presented depending on the first letter of the company name: “A” to “D” in april of each year. “E” to “J” in May of each year. “K” to “P” in June of each year. “Q” to “Z” in July of each year. Foreign Investment notices.-

According to article 38 of the Regulations of the Foreign Investment Law, quarterly reports are also obligation of Mexican companies with foreign investment, when the total quarterly income or outcome for the following concepts is higher than 3,000 times the minimum wage salary enforced in Mexico City at the time of presentation ($171,000 M.N.) a) New contributions or withdrawals, b) Profit withholding from the past tax year and the disposal of the withheld accumulated profits, or c) Outstanding loans to, subsidiaries residing abroad, to the parent company abroad, to foreign investors abroad that are partners or stockholders, or to foreign investors abroad part of the corporate group to which the entity filing the renewal report belongs to. Foreign Investment notices (Quarterlies).-

It is very common for maquiladoras to require the services or employment of foreign technicians or executives. Therefore the companies must be recognized as a sponsor before the immigration authority prior to proving its good standing. Subsequently the company may request Mexican visas for its employees and/or executives in order for their work or services to have legal effect before any third party in Mexico when executing the work/services within Mexican territory. The company will be held accountable for any controversy relating to the applicant’s misconduct while in Mexico and fines and sanctions may be assessed. Furthermore, it is important to renew the Mexican visas each year within due time since the issuance of extensions may take up to 4 weeks and untimely renewal requests carry fines. Article 42 of the General Population Act. Mexican Visas for Employees.-

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