Corporate books seem like a formality until there is a lawsuit, a sale of the company, or an attorney-in-fact who should no longer be signing. At that point they become the evidence of who makes the decisions, who owns the shares, and who can bind the company.
What the law requires
Every legal entity must keep a general ledger and a minute book, on paper or electronically in accordance with the standard for the retention of data messages (Articles 33 and 34 of the Commercial Code, Código de Comercio), and keep its supporting records for at least ten years (Article 38). A stock corporation must also keep a share register and treats as owner whoever appears registered in it (Articles 128 and 129 of the General Law of Commercial Companies, Ley General de Sociedades Mercantiles), as well as a capital variations book (Article 219). Shareholders’ meeting minutes may be signed by hand or electronically; minutes of extraordinary meetings are notarized and registered with the Public Registry of Commerce (Article 194). The ordinary shareholders’ meeting must be held at least once a year, within the four months following the close of the fiscal year (Article 181).
As for powers of attorney, a general power of attorney for acts of ownership (actos de dominio) grants all the powers of an owner (Article 2554 of the Federal Civil Code, Código Civil Federal). If a power of attorney was granted to deal with a specific person, the revocation must be notified to that person; otherwise, the company is bound by whatever the attorney-in-fact does afterward (Article 2597). Because registering powers of attorney with the Public Registry of Commerce is optional (Article 21, section VII, of the Commercial Code), registration does not replace notification.
What to do and by when
- Hold the annual ordinary shareholders’ meeting no later than April 30 if your fiscal year ends on December 31, and record the minutes in the book.
- If you keep printed books, have them bound within the three months following the close of the fiscal year.
- Reconcile the share register with the actual transfers and capital increases.
- Notarize and register the minutes of every pending extraordinary shareholders’ meeting.
- Take an inventory of the powers of attorney in force and revoke those held by former executives, notifying the revocation to the banks, clients, and suppliers they dealt with.
Recommendations to mitigate risk
If, in a commercial lawsuit, a company does not produce its books or states that it does not have them, its opponent’s books are taken as evidence against it (Article 1295, section III, of the Commercial Code). Acts that must be registered and are not have effect only between the parties to them (Article 27), and a power of attorney whose revocation was not notified to the third party continues to bind the company. Keeping records in a language other than Spanish, for its part, is punishable by a fine of no less than MXN 25,000, not to exceed five percent of the capital (Article 37).
How we approach it at LEXURE
As part of the Blindaje Corporativo, we audit the books, minutes, share register, and powers of attorney, and we rebuild whatever is missing. We also deliver an annual calendar of shareholders’ meetings, registrations, and power of attorney reviews.
If you are not certain that your books would withstand a lawsuit, schedule a diagnostic meeting with us.
Legal basis
- Commercial Code (Código de Comercio), Articles 21, section VII, 27, 33, 34, 37, 38, and 1295, section III. Current text (opens in a new tab)
- General Law of Commercial Companies (Ley General de Sociedades Mercantiles), Articles 128, 129, 181, 194, and 219. Current text (opens in a new tab)
- Federal Civil Code (Código Civil Federal), Articles 2554 and 2597. Current text (opens in a new tab)
This note is for information only and describes the law in force on the verification date. It is not legal advice on a specific matter. It is a translation of the Spanish original: Mexican law is published in Spanish, and the official Spanish texts prevail.