On March 14th, 2016, the Ministry of Economy ("SE") published in the Federal Official Gazette a presidential decree, in which it amended the General Law for Commercial Companies ("LGSM"); in such amendment, it included a new type of corporation, the Simplified Stock Corporation ("SSC").
In Mexico the incorporation of a company is considered, under the Federal Law for the Prevention and Detection of Transactions with Illegal Resources (the "Law"), as a "vulnerable activity".
Under the Law, the provision of professional services for the incorporation of a company and the provision of Notary Public services became considered as a vulnerable activity. The Law specifies that when an activity considered as a "vulnerable activity" is taking place; a notification must be issued to the Ministry of Finance and Public Credit ("SHCP") by the Notary Public or service provider rendering the services.
This consideration, among other subjects, forced all service providers for the incorporation of a company and Notary Publics in Mexico to issue questionnaires to individuals and companies intending to incorporate a new company. In such questionnaires the interested parties must specify the following information:
- General information of the individual or company responsible for the vulnerable activity.
- General information of the client, users or the controlling beneficiary, and the information regarding its activity or occupation.
- General description of the vulnerable activity being notified.
Having considered the above, the SCC was added to the LGSM with a different incorporation process, which replaces the Notary Public with a web site. With this determination, the SE intended to boost the economy and help regulate small and medium commerce; principally aiming it to small business and entrepreneurs, as incorporating any other type of company under the LGSM requires a Notary Public to grant the deed of incorporation, generating costs that in most of the cases are excessive for small business and entrepreneurs.
Amongst the requirements to incorporate a SSC we can find the following:
- the grantor must have an advanced electronic signature ("FIEL"); and
- only individuals can be stockholders.
The requirement regarding the use of the FIEL is established, as the FIEL is issued by the Tax Administration Service and contains all the information needed to identify an individual or a company.
It is here where we find incongruence, as the incorporation of a SSC does not require the provision of professional services for the incorporation of a company or the provision of Notary Public services, given that in strict interpretation of the Law, the incorporation of a SSC does not require the notification to the SHCP established in the Law.
This lack of regulation may allow the use of illegal resources at the time of incorporation as the money granted by the SSC stockholders can be funneled from illegal activities. The Notary Public is responsible for verifying the origins of the resources that will be given to the company at the time of its incorporation.
Without the participation of the Notary Public, there is no one that can verify the origins of the resources, furthermore the Notary Public also attests to the identity of the grantors of the deed of incorporation, however, when the SSC is incorporated, this takes places through a web site, the grantor uses the FIEL as the only mean of identification, but there is no one to attest and give certainty to the identity of the grantor.
Following on the above, the rest of the companies regulated under the LGSM, are required to be incorporated through a Notary Public; it is at this time that the information regarding the grantors of the deed is gathered and submitted by the service provider or Notary Public to the SHCP.
As we can appreciate, the SE omitted to consider the scope of the Law at the time that the SSC was designed, which endangers the verification of the origin of the resources provided to incorporate the company, as well as identifying of the grantors.
The SSC can be a boost for small business and entrepreneurs while helping the economy, but it should be further regulated and included under the scope of the Law, in order to avoid encouraging the use of SSC for the commission of illegal activities.
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