Mexico: Joint Venture with Pemex

Last Updated: 26 November 2015

Joint Ventures in Mexico

Joint Ventures are not defined in the Mexican legal framework. After analyzing other legislation we can define a joint venture as a legal organization that takes the form of a short-term partnership in which persons or companies jointly undertake a transaction for a profit. Generally, each person contributes assets (such as money, expertise, etc,) and from time to time they share risks. Like a partnership, joint ventures can involve any type of business transaction.

Even though that there is no special regulation for the joint ventures, the vehicles through which the joint ventures may operate are regulated in the Mexican legislation (further detailed), there are no relevant differences in the regulation of vehicles used for international and domestic joint ventures.

The two main forms of structuring a joint venture in Mexico are the following:

  1. Incorporate a new entity
  2. Executing a partnership agreement

Incorporating a separate legal entity (a company or a trust) is the most commonly joint venture used in Mexico.

Legal entities are regulated by the following laws:

  1. General Law of Commercial Companies (Ley General de Sociedades Mercantiles): this is a Federal law that, among other things, defines certain types of commercial entities and the right and obligations of its partners or shareholders.
  2. Securities Exchange Law (Ley de Mercado de Valores): this is a Federal law that this is a Federal law that, among other things, contemplates the Sociedad Anónima Promotora de Inversión (defined below).
  3. Mexican Competition Law (Ley Federal de Competencia Económica): this is a law governs antitrust matters and addresses merger reviews, meaning acquisitions and other forms of combinations between competitors or other economic agents.
  4. Commerce Code (Código de Comercio): this regulates all the commerce acts at Federal level.
  5. Civil Code: there is a Federal Civil Code (Código Civil Federal) and also the Federal District and each state has its own civil code, (all of the in general terms are similar to the Federal Civil Code). The Civil Code covers, among other, property (such as real state, possession and easements) and obligations (such as contracts, agency, mortgages and public registries).
  6. Banking Law (Ley de Instituciones de Crédito): this regulates all the matters in respect of all the matters related with trusts.

These are the most relevant forms of entities used to structure a joint venture:

  1. Stock corporation (sociedad anónima) this is the most commonly used corporation in Mexico, it statutory governance rules are not flexible.
  2. Investment promotion stock corporation (sociedad anónima promotora de inversión) this is a form of corporate entity that offers substantial flexibility with tailored made provisions agreed by their investors.
  3. Limited-liability company (sociedad de responsabildiad limitada) this is a form of Company that doesn´t have flexibility for investors, however it has some tax advantages.
  4. Business trust (fideicomiso empresarial).The trust is incorporated by the investors but is administrated by the trustee and directed by a Committee.

The second most common form to structure a joint venture is by executing a undisclosed partnership agreement (which is commonly known as the asociación en participación), this agreement does not create a new entity, however, according to the Tax Law it creates a “new entity” (only for tax purposes). The structure of this agreement is divided by the active partners and silent partners, the active partners has liabilities before third parties and the silent partner does not have any liability, it only contributes funds and is involved in the management of the business.

This agreement is ruled by the General Law of Commercial Companies (described above). It describes the undisclosed partnership agreement as an agreement whereby one person grants to other persons, who in turn contribute assets or services, a participation in the profits and losses of a business or a commercial transaction.

Quick overview of Petróleos Mexicanos (“Pemex”) legal framework

On August 11, 2014, a package of reforms to Mexico’s secondary energy laws (the “Energy Reform”) was published. This Energy Reform stems from the amendment to Articles 25, 27, and 28 of the Constitution and the corresponding inclusion of 21 transitory articles, (effective as of December 21, 2013 (the “Constitutional Reform”).

In addition to the modification of various existing laws, the Energy Reform contemplated the issuance of the Petróleos Meixcanos Law (the “Pemex Law”).

The Pemex Law establishes that Pemex is a productive state-owned company, exclusively owned by the Federal Government, with legal capacity and its own property, and it shall have technical, operational and managerial autonomy, as provided by the Pemex Law, additionally establishes that, Petróleos Mexicanos shall be subject to the provisions of the Pemex Law, its Regulations and the provisions therefrom. Commercial and civil law shall be supplemental.

As a result of the Pemex Law, Pemex Board of Directors created the Corporate Office of Alliances and New Businesses, the purpose of this Office is to define and direct domestic and international alliances and new businesses for Pemex, their productive state-owned subsidiary companies and in the event affiliate companies, taking care of the guidelines and general policies approved and issued by the Pemex Board of Directors.

The Pemex Board of Directors, approved and issued on April 29, 2015 and becoming effective on June 15, 2015, the “Policies and General Guidelines for Investment, Associations and Strategic Alliances of Petróleos Mexicanos, State-productive subsidiaries companies and affiliate companies” (the “Guidelines”).

The purpose of the Guidelines is to establish the priorities related with investments, strategic partnerships and alliances (“ISA”) with Pemex, their State-productive subsidiaries companies and affiliate companies.1 The relevant points of the Guidelines among others are the following:

  1. They define: (i) Investment (direct or attracted) as the resources provided by Pemex and/or third parties, in a pro rata proportion, intended to create, maintain or increase the economical value of the company, and (ii) Partnership and Strategic Alliances as the agreement with one or more persons with the purpose of develop investments or exchange knowledge in an efficient way for Pemex.2
  2. All of the ISA granted by Pemex or through third parties shall be aligned in accordance with the Business Plan approved by Pemex Board of Directors.
  3. The shareholders agreements will be carefully analyze by Pemex, always protecting the interests of Pemex.
  4. Each of the ISA should be sustained with a business case, describing the profitability, financing schemes, among others.
  5. Each of the ISA should contain a risk analysis, and it proper mitigation plan.
  6. All the long term relations in which Pemex is involved, shall have a reasonable exit clause for Pemex and always containing the minority rights clauses in favor of Pemex.
  7. All the investments may contain a pre investment budget, so Pemex could analyze the business case.
  8. In case that the state-owned productive subsidiary company, affiliate (with or without the participation of a third party in such company) or a company (in which Pemex participates with 49% or less) grants a corporate guaranty. The corporate guaranty shall be limited only to the state-owned productive subsidiary company, affiliate or the company (in which Pemex participates with 49% or less), and it is not considered that Petróleos Mexicanos by any reason may be a joint obligor.
  9. Any potential threat to the investment shall be immediately notified to Pemex.
  10. The investments are classified as follows: (i) equity investment projects funded by Pemex or its affiliates; (ii) productive projects developed by third parties as per request of Pemex or affiliates; (iii) equity investments from other companies; (iv) investments with funding access and (v) investments in real estate for administrative support.

1 For the purposes of the Guidelines affiliate company is define as such companies in which Pemex may participate directly or indirectly, in more than a fifty percent, even that if such company is incorporated in accordance with an international legislation.

2 The name Pemex refers as well to Pemex Subsidiaries and Affiliates.

This document is not intended to create an attorney-client relationship. You should not act or rely on any information in this document without first seeking legal advice. This material is intended for general information purposes only and does not constitute legal advice. If you have any specific questions on any legal matter, you should consult a professional legal services provider.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Contact the Author?
Click here to email the Author
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Supporting Documents
Significant Recent Cases
RDA has a solid, proven record acquiring and securing rights of way (ROWs) for many infrastructure and energy-related projects in Mexico.
Useful Resources
As part of the commitment that RDA has with the communication and information we actually have with our clients you will find information notes that have been prepared to keep you informed of any changes or news in the energy sector in Mexico.
Comisión Federal de Electricidad (CFE) is a company created and owned by the Mexican government. It generates, distributes and markets electric power for almost 36.1 million customers.
Upcoming Events
In this section you will find the latest news about RDA, among others acknowledgments and awards.
Tools
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.