Mexico has passed significant corporate governance related reforms in recent years, in particular:

There is a strong effort from the federal government to enforce sanctions against criminal organisations that permeate the Mexican economy using different structures.

The General Law of Administrative Responsibilities (Ley General de Responsabilidades Administrativas) entered into force in 2017 and included, for the first time in an administrative statute in Mexico, a list of offences that are considered acts of corruption, such as bribery, influence peddling, and collusion in public tenders (see Question 19).

On 14 June 2018, the General Law of Commercial Companies was reformed after an evaluation by the Financial Action Task Force, an inter-governmental entity developing and promoting policies to protect the global financial system against money laundering and terrorism financing. In its 2018 report it stated that Mexico lacks an adequate system to obtain accurate and up-to-date information on the legal ownership of companies and the ultimate beneficial owners of legal entities.

Companies must now submit a notice on a public website managed by the Ministry of Economy of a registration or transfer of:

A new edition of a key corporate governance code was issued in 2018 (see Question 4).

In recent months, several laws have been reformed which change the way of functioning of many corporations in Mexico:

The General Law of Commercial Companies (Ley General de Sociedades Mercantiles) regulates seven forms of business organisations. Some have become obsolete and are no longer used. In practice, the most commonly used are the following.

This is a private company and must have at least two partners up to a maximum of 50. Partners are only responsible for the company's liabilities up to the amount of their equity participation. The capital is divided into equity quotas, which can be of a different value and category, but must be at least MXN1. Quotas cannot be represented by negotiable instruments.

To assign equity quotas and admit new partners, the prior consent of a majority of the partners is required, unless the company's bye-laws state otherwise.

This is the most common corporate entity used in Mexico. It must have at least two shareholders and has no limit on the number of shareholders.

Shareholders are responsible for the company's liabilities up to the amount of their participation. The capital is divided into shares. The shares are represented by share certificates that are freely negotiable, unless otherwise stated in the company's bye-laws.

Shares are of equal value and grant the same rights, unless otherwise stated in the company's bye-laws. Each share grants a right to one vote, unless the bye-laws state otherwise.

The Securities Market Law (Ley del Mercado de Valores) regulates three forms of stock corporations, the following being the most common.

Investment Promotion Stock Corporation (sociedad anónima promotora de inversión) (SAPI). This can, with the prior consent of the board of directors, buy back their own shares. The threshold for the exercise of minority shareholder rights is generally, a shareholding of at least 10%.

Public Traded Company (sociedad anónimas bursátiles) (SAB). Its shares are both:

Corporate governance matters are generally regulated by the General Law of Commercial Companies. Certain stock corporations are also regulated by the Securities Market Law (see Question 2).

Certain other federal laws impose corporate governance obligations. For example, the Income Tax Law requires the board of directors to present a tax compliance report to the shareholders' meeting. Companies that commonly participate in public tenders with the federal government must file a manifesto with the Ministry of Public Function (Secretaría de la Función Pública) to declare that the company, shareholders, officers, and other related parties do not have a conflict of interest with public officials in the contracting authority.

A new edition of a key corporate governance code was issued in 2018 (see Question 4).

Compliance with the corporate governance framework is also monitored closely by shareholders, external auditors, credit rating agencies and lenders. Institutional investors can have a particularly influential position. A group of institutional investors that has proven to be particularly influential in these matters are Pension Fund Managers (Administradoras de Fondos para el Retiro).

The Business Co-ordinating Council (Consejo Coordinador Empresarial) (CCE), made up of the seven most representative chambers of commerce in Mexico, issued in 2018 the third edition of the Code of Principles and Best Practices of Corporate Governance (Código de Principios y Mejores Prácticas de Gobierno Corporativo) (Corporate Governance Code). This document, among other topics, covers best practices and principles recommended to improve the corporate governance framework of companies. It established principles and best practices that improve the company's integration and operation, for example regarding board composition, committees, audit, shareholders' meetings, among others Although it is not mandatory, it is the best reference guide for all types of companies (whether commercial or civil entities). It is structured by principles and best practices in the following areas:

Public traded companies must annually disclose their degree of compliance with the Corporate Governance Code to the market. This information must be included in their annual report.

Companies see this as an opportunity to grow and promote sustainability in their business. There are no plans to reform the Corporate Governance Code, since it was last updated in 2018.

Corporate social responsibility (CSR) is not mandatory but it is common for companies to launch CSR projects and engage outside interests voluntarily. Such companies take into consideration the economic, social and environmental impact of their operations, decisions and actions, and their relationship with the community.

The Mexican Philanthropy Centre (Centro Mexicano para la Filantropía) (CEMEFI) usually grants Socially Responsible Enterprise status (Empresa Socialmente Responsable) to a company that complies with a number of requirements, including the following, which is highly regarded by investors and other interested groups:

CSR is based on four strategic principles:

As part of CSR policies, companies report on their internal and external social, economic and environmental aspects, including climate change impact.

With regard to the climate change impact, Mexico has issued several laws on the past years. Such changes include the General Law on Climate Change, issued on 6 June 2012, which aims to guarantee a sound environment through the development of public policies to address the adverse effects of climate change and mitigate greenhouse gas emissions.

The Energy Transition Law also covers climate change impact in Mexico. This law was issued on 24 December 2015, and aims to regulate the sustainable use of energy, as well as the obligations in terms of clean energy and the reduction of contaminating pollutant emissions from the electricity industry.

Mexican Official Standards (NOMs) were also introduced to reduce emissions. In December 2013, several constitutional reforms in energy matters were enacted with the purpose of modernising the country's energy sector. This new framework lays the foundations for a market for the generation of renewable energy sources and cleaner technologies, in addition to promoting energy efficiency in the generation, distribution and transmission of electricity, among other issues.

Mexican standards and laws have require companies to report to the Ministry of Environment and Natural Resources about the issuance of contaminating pollutant emissions, as well as greenhouse emissions, to have a record and implement the corresponding measures to mitigate their adverse effects.

Regarding sustainability and ESG reporting obligations in Mexico, to date this is still voluntary as there are no applicable laws or regulations that require companies to present annual reports to the market or filings to Mexican authorities. However, listed companies on the Mexican Stock Exchange are required to include in their annual report whether they have environmental policies, environmental certificates or recognitions, and a general description of the effects that climate change may have on the company’s business, among other relevant sustainability-related information.

However, large Mexican corporations and multi-national companies with operations in Mexico are currently following international ESG-voluntary-disclosure frameworks, such as the:

Mexican companies can either have a unitary or collegiate board structure.

Under the General Law of Commercial Companies:

A public traded company must be managed by a board of directors and a chief executive officer (CEO). Its board is assisted by special committees of directors carrying out audit and corporate functions.

The board consists of the chairperson and other board members appointed by the shareholders' meeting. Although there are no specific positions given to the other members, in practice companies usually appoint a chairperson, a secretary and a treasurer.

Employees do not have a right to board representation.

The board of directors of a stock corporation and an investment promotion stock corporation must have at least two directors. There is no limit on the number of directors.

In public traded companies, the board of directors must not exceed 21 directors.

A company's bye-laws can include specific rules on the number of managers or directors that form the board, term in office, alternate members, and other requirements.

The Corporate Governance Code recommends companies to appoint at least three directors and a maximum of 15, with an uneven number to avoid deadlock.

Individuals who have been suspended by judicial order from carrying out commercial activities cannot be appointed as members of a board of directors.

In public traded companies, a former external auditor of the company, including of companies in the same corporate group, must observe a 12-month waiting period before becoming a member of the board of directors.

A director must be at least of legal age, that is, 18 years old.

There are no nationality restrictions on directors. Foreign directors must comply with the applicable immigration rules and permits when attending board meetings in Mexico.

Corporate directors are not permitted under Mexican Law.

There are no mandatory requirements relating to the gender of directors or director quotas. The Corporate Governance Code recommends involving women in the board of directors, to contribute different points of view, experience and abilities. However, it does not refer to any quotas or specific requirements.

Independent directors are recognised.

Private stock corporations and limited companies are not required to appoint independent directors but can do so in their bye-laws.

Public traded companies and investment promotion stock corporations must have independent directors on their boards.

Under the Securities Market Law, at least 25% of the board members of a public traded company must be independent.

The Corporate Governance Code and the Securities Market Law in relation to public traded companies and investment promotion stock corporations state that the following persons are not an independent director:

For public traded companies and investment promotion stock corporations, the Securities Market Law also provides that a shareholder forming part of a controlling group of shareholders is not an independent director.

There are no restrictions on appointing directors or managers as officers of the company. However, officers do not qualify as independent directors.

In private companies it is not mandatory to appoint officers.

Public traded companies must be managed by a board of directors and a CEO. The Chairman of the Board may also be the CEO of the Company.

The shareholders' meeting appoints the members of the board of directors (see Question 33). A shareholder or a group of shareholders representing at least 25% of the share capital of stock corporations, or at least 10% of public traded companies and investment promotion stock corporations can appoint one member of the board.

The shareholders' meeting removes members of the board of directors (see Question 33).

There are special cases in the General Law of Commercial Companies:

There is no mandatory term of appointment. A company's bye-laws can set a term of appointment.

The annual shareholders' meeting must resolve to ratify, remove, or appoint the members of the board of directors (see Question 32).

Directors or managers continue to perform their duties, even if the term of their appointment has elapsed, if the company does not appoint a replacement.

In public traded companies, directors must continue in their positions for 30 days from completion of their term of appointment or from the date they resign (Securities Market Law).

Directors do not have to be employees of the company.

The relationship between a director and the company is not a labour relationship. Directors are part of the administration body of the company and while their relationship is not clearly defined in the law, it is closer to a professional services relationship than a labour relationship.

However, there is no prohibition on an employee of the company being appointed as a non-independent board member.

In private companies (stock corporations, limited companies and investment promotion stock corporations), the shareholders can appoint one or more statutory examiners to oversee the performance of the board of directors. Statutory examiners must present a report to the annual shareholders' meeting, including their opinion on whether the management's performance is acceptable, and if the financial information presented by the management accurately reflects the company's financial situation.

Statutory examiners must be appointed in private stock corporations but this is not mandatory for limited liability companies.

In public traded companies, this function is performed through the audit and corporate practices committees and the external auditors.

However, investment promotion stock corporations can either have a statutory examiner or committees and external auditors to oversee the performance of the board of directors. This depends on if they resolve to be managed as a private or public traded company.

Directors can own shares in the company but this is not mandatory. In many private companies, particularly family-owned companies, it is common for most shareholders to be on the board of directors.

The shareholders' meeting determines the directors' remuneration.

Public traded companies must disclose in their annual reports the total benefits (including a description of their nature) and remuneration paid to board members and high-level officers and related persons, although disclosure is usually made on an aggregate basis.

The shareholders' meeting determines the remuneration paid to the members of the board of directors. Shareholders' approval in this regard is binding to determine directors' remuneration.

The Corporate Governance Code recommends internal policies to define the directors' responsibilities, key performance indicators, selection process, appraisal and remuneration. It is also recommended to disclose the appraisal and remuneration policy in the annual report.

Notice for board meetings must be given to all board members within a period stated in the bye-laws.

Unless otherwise provided in the bye-laws, the quorum is a majority of the board of directors, and its resolutions are passed by a majority of the attending directors.

In stock corporations and limited companies with a sole administrator, the sole administrator has legal authority to carry out the company's business, unless otherwise restricted by the bye-laws.

For companies managed by a board of directors, this authority is granted to the board.

Certain matters must be approved by the shareholders' meeting (see Question 32.

The powers of the directors can be restricted in the company's bye-laws.

Such restrictions are enforceable against third parties. However, it is presumed that directors have power to bind the company. For this purpose, it is important to verify the identity and authorities of each involved party.

In public traded companies, a transaction representing 20% or more of the company's consolidated assets must be approved by the shareholders' meeting.

The board of directors can appoint a board member as a special delegate to carry out specific tasks. In the absence of such an appointment, the chairperson can execute board resolutions.

The company can grant powers of attorney to directors to act individually, as an attorney-in-fact and not as a director. The types of powers and authority under Mexican law can be summarised as follows:

Powers of attorney granted to a director can be limited, for example exercising the power jointly with another attorney-in-fact, a limit on the value of the act or transaction and on the time in which it can be carried out.

The relationship between the company and an attorney-in-fact is governed by civil law, so it is important to review the relevant state civil codes to see if special rules or regulations apply. For example, certain states limit the term of powers of attorney to five years.

The board of directors of a public traded company is assisted by one or more special committees responsible for audit and corporate practice matters. Under the Securities Market Law, these committees must consist of independent board members and have at least three members. The chairperson in these committees is appointed by the shareholders' meeting and cannot also be chairperson of the board of directors.

The Corporate Governance Code recommends companies to set up committees for audit, evaluation and compensation, finance and strategic planning, and risk assessment and compliance. It also recommends that these committees are formed mostly of independent directors, with a minimum of three and a maximum of seven directors.

Directors must act in the interests of the company, without favouring a specific shareholder or group of shareholders. Directors must act diligently, by adopting informed decisions and observing the duties imposed on them by the General Law of Commercial Companies and the company's bye-laws.

The General Law of Commercial Companies provides that directors are jointly and severally responsible for:

Directors must also keep confidential any information or matters they have access to while in office if it is not publicly available. This obligation continues to apply for one year following the date of their removal or resignation.

A director is not liable for a particular act if the director expressed disagreement with the deliberation and resolution of the act, provided that the director did not act negligently.

A director with a conflict of interest with the company must disclose it to the other directors and refrain from voting and adopting any resolution relating to the conflict. Otherwise, the director can be liable for damages or losses caused to the company (see Question 28).

Directors of public listed companies have a duty of care and a duty of loyalty to the company, under the Securities Market Law.

Any director who breaches any of the above is liable for any damages caused by the breach and may also be subject to fines imposed by the Securities Market Law.

Criminal offences are regulated by the Federal Criminal Code (Código Penal Federal) and state criminal laws. Penalties vary depending on the seriousness and circumstances of the case and include fines, imprisonment or both.

Although the National Code of Criminal Proceedings (Código Nacional de Procedimientos Penales) sets out criminal liability for corporations, the legal concepts of theft, fraud and bribery relate to criminal offences committed by individuals, regardless of the position they hold in a company.

Under federal law, an individual commits theft when they take the personal property of another person without a right to do so or consent from the person authorised by law to give consent (Article 367, Federal Criminal Code). Penalties depend on the value of the personal property stolen.

An individual commits fraud when he or she misleads a person, or takes advantage of the misunderstanding of another person, and obtains an unlawful benefit. Penalties depend on the value of the benefit unlawfully obtained (Article 386, Federal Criminal Code).

The penalties for fraud (Article 388, Federal Criminal Code) also apply to a person administering another person's property (such as a director) who, with intent to obtain a benefit, causes a loss to that person by altering accounts or contracts, through:

Under the Federal Criminal Code, bribery is committed by public officials who solicit or receive a bribe, and by private individuals who offer or pay to corrupt a public official (Article 222, Federal Criminal Code).

A person is also guilty of bribery under the Federal Criminal Code if they promise or give a benefit to a public official, to cause the public official to do or refrain from doing an act relating to the official's function, employment, charge or commission. Penalties include monetary fines and imprisonment.

The General Law of Administrative Responsibilities prohibits a list of offences considered acts of corruption, such as bribery, influence peddling, and collusion in public tenders. Bribery is defined as either:

Penalties for companies committing acts of corruption under the General Law of Administrative Responsibilities (Article 81), include the following, depending on the seriousness of the conduct and if it was approved by the board of directors, audit committee or shareholders:

The General Law of Administrative Responsibilities also recommends companies to create a compliance programme, setting minimum requirements to receive credit if penalties are imposed by a law enforcement authority.

A director of a public traded company who breaches their duty of care under the Securities Market Law (see Question 18) must indemnify the company for all damages or losses it incurs arising from the breach. This indemnification can be limited by the bye-laws or a shareholders' resolution, if the breach did not involve fraud, bad faith or illegal activity.

A director who breaches their duty of loyalty under the Securities Market Law (see Question 18) is liable to pay damages and losses. The company cannot agree otherwise or limit the director's liability. The company cannot obtain insurance or bonds in favour of the director to cover the indemnity the director must pay due to a breach of the duty of loyalty.

Directors in public traded companies who commit market abuse through dealings with prospectuses and other documents may be liable to pay for damages and losses (see Question 30).

Under the Commercial Bankruptcy Law (Ley de Concursos Mercantiles) Directors and officers are liable to the company for losses incurred due to corporate transactions carried out during the company's insolvency and are subject to claims for damages.

Directors and officers owe fiduciary duties to exercise their business judgement in the best interest of the insolvent company for the benefit of its shareholder owners, while continuing to bear the task of attempting to maximise the economic value of the business for any potential residual benefit to the shareholders.

Under the Commercial Bankruptcy Law (Article 270 bis), directors and officers are liable in an insolvency context for the following:

The Commercial Bankruptcy Law includes the business judgement rule to protect directors and officers from liability due to decisions made on an informed, statutory, good-faith basis with reasonable skill and prudence, with an honest belief that the decisions are in the company's best interest.

Administrative environmental laws, such as the Federal Law of Environmental Liability 2013 (Ley Federal de Responsabilidad Ambiental) (Environmental Law), impose liability on persons or legal entities committing an unauthorised or illegal activity that generates a risk or damage to human health or the environment, or on an owner or possessor of polluted land or a hazardous substance or asset.

Legal entities are liable for environmental damage caused by its directors if they represent the company or order or consent to the performance of an unauthorised activity (Article 24, Environmental Law). If a company violates an administrative environmental law, administrative proceedings are usually brought against the company and not its directors or managers.

Environmental criminal liability (including imprisonment) usually attaches to directors who have ordered or failed to prevent conduct that leads to illegal environmental risk or damage, or who are responsible for the criminal conduct. There are several judicial precedents (at federal and state level) imposing criminal liability on directors for environmental crimes.

In relation to health and safety law, directors are considered to be representatives of the employer company, and their actions relating to workers (including health and safety matters) incur liability that attaches to the company (Article 11, Federal Labour Law). The Federal Labour Law (Ley Federal del Trabajo) imposes penalties on employers or workers who do not comply with a health and safety provision.

Under the Federal Anti-Trust Law (Ley Federal de Competencia Económica), directors or managers of a company who have made or adopted decisions, as well as instructed or exercised decisive influence on decision-making, are jointly liable for damages incurred due to prohibited actions.

The Competition Commission can impose administrative fines and other penalties on directors, members or officers of the company who act on behalf of the company or who enter into illegal mergers.

Economic agents (companies or individuals) that decided, ordered, influenced or directly executed an illegal activity under the Federal Anti-Trust Law are jointly liable (Article 4). This provision is relevant where a company is sued in the civil courts by persons claiming damages and loss of profit derived from a violation of the Federal Anti-Trust Law.

Under the Federal Criminal Code (Código Penal Federal), individuals participating in cartels to fix prices, allocate markets or limit the offer in bid-rigging, or who share information to facilitate such cartels, can be criminally prosecuted on a criminal complaint filed by the Competition Commission. Individuals found guilty can be sentenced to five to ten year's imprisonment, and subject to criminal fines (Article 254 bis, Federal Criminal Code).

Before the tax reform that entered into force on 1 January 2020, partners, shareholders, directors, managers and administrators were only jointly and severally liable for the company's unpaid tax if:

Since the tax reform that entered into force on 1 January 2020, partners, shareholders, directors, managers and administrators are now jointly and severally liable when the company does any of the following:

Under the Personal Data Protection Law, directors can be liable if they are a data controller. Data controllers access, manage, handle, transfer or dispose of personal data and take decisions on this.

Directors, officers and employees can be individually responsible for fraud (see Question 19, Fraud) or money laundering, and can be punished with a penalty under Article 24 of the Federal Criminal Code, which includes:

A director's liability can be limited to a specific amount of compensation of incurred damages, if provided by the company's bye-laws or approved by the shareholders' meeting.

The shareholders' meeting can pardon or indemnify a director against liability due to malpractice and not exercising due diligence if the director acted in good faith and the incurred damages have been covered or recovered by the director. The company or its shareholders cannot indemnify a director against liability for any action taken in bad faith or wilfully.

Some companies take out directors and officers (D&O) insurance to cover actions and liability incurred by directors and officers against the company. In practice, this is commonly taken out by big companies.

D&O insurance can cover the costs of indemnities, bail, a legal defence and other expenses.

It can be upgraded to cover other issues such as protecting family property, decisions of affiliated or subsidiary companies, employment law claims such as dismissal, discrimination and harassment, and civil bonds.

The company can and usually does pay the insurance premiums.

A third party (such as a parent company or controlling shareholder) who has not been formally appointed as a director cannot be liable as a de facto director.

If a director has a conflict of interest with an operation or decision the board is going to take, they must notify the board and must not vote or resolve on the conflicted matter. This will not affect the quorum for the board meeting. A director who does not do so is liable for incurred damages that affect the company (General Law of Commercial Companies).

The Securities Market Law has similar provisions. Further, a director will also breach their duty of loyalty to the company (see Question 18 if, after noticing a conflict of interest, they still assist and vote in board meetings on the matter.

Public traded companies have guidelines on several topics including the use of company property and related party transactions. Relevant related party transactions (including those entered into by the company with a director) are subject to approval by the committee in charge of analysing related party transactions (usually, the corporate practices committee).

Additionally, the Securities Market Law provides a comprehensive set of rules on the acquisition and disposal of shares and the disclosure of these transactions by directors (see Question 30). However, restrictions on particular transactions between a company and its directors depend on the company's bye-laws.

The Corporate Governance Code recommends that decision-making relating to managing the company treasury, contracting derivative financial products, investing in assets and contracting liabilities should be subject to board approval. This is to ensure that decisions align with the company's strategic plan.

People with privileged information about the company, such as directors, cannot acquire directly or indirectly securities or negotiable instruments issued by the company in the three-month period after the last sale or operation of the company's securities or negotiable instruments that they were involved in (Article 365, Securities Market Law).

Article 364 of the Securities Market Law also prohibits such persons from doing the following:

Directors must not disclose confidential information of the company to third parties, unless it must be disclosed to judicial or administrative authorities.

However, under the Securities Market Law, directors of public traded companies must not hide or omit disclosure of information to the public, shareholders or stockholders if they deem it necessary or relevant to the share price of a share allocation or other relevant subject (Article 383, Securities Market Law).

Directors who hide privileged information when disclosure is necessary can be punished with imprisonment from five to ten years.

Companies must hold an annual meeting within the four months after the end of the financial year, that is, from January to April, where they must, among other issues on the agenda, cover the following:

(Article 181, General Law of Commercial Companies.)

If the annual meeting does not take place and the company's financial statements are not approved, some actions may not take effect. For example, to determine dividend payments it is required by law to approve financial statements for the last financial year, or if a company is to undergo a transformation like a merger or liquidation, the company must first comply with its corporate obligations such as approving its financial statements.

Mexican legislation does not contemplate holding virtual meetings electronically.

An extraordinary shareholders' meeting usually resolves on issues that will modify the company's structure, for example, a change of nationality, corporate domicile, corporate purpose, and type of regime. The issues listed in Article 182 of the General Law of Commercial Companies (see Question 34) must be resolved by an extraordinary meeting, as well as those listed in the company's bye-laws as requiring an extraordinary resolution.

Unless otherwise stated in the bye-laws, the quorum for an extraordinary meeting is shareholders or partners representing at least 75% of the company's share capital. Extraordinary resolutions are approved by shareholders or partners representing at least 50% of the company's share capital (Article 190, General Law of Commercial Companies).

Other issues are resolved through ordinary shareholders' meetings. The quorum for an ordinary meeting is shareholders representing at least 50% of the company's share capital and ordinary resolutions are approved by a majority of those present.

Meetings must be held at the company's corporate domicile to be valid. Prior notice must be sent to all shareholders of the agenda, time and date of the meeting. Notice must be given by the sole manager/board of directors or examiner, at least 15 days before the meeting for stock corporations and eight days for limited companies, unless otherwise stated in the bye-laws. Notice is given using the electronic system managed by the Ministry of Economy.

Prior notice is not required if 100% of the company's share capital is represented at the meeting, although public traded entities must always give at least 15 days' notice using the electronic system.

Companies can hold meetings to pass unanimous resolutions outside the company's corporate domicile. However, these resolutions must be approved by a unanimous vote of all the shareholders, and this option must be included in the bye-laws.

The following must be approved by an extraordinary shareholders' meeting (see Question 33):

A change of the company's corporate purpose and a change in the shareholders' obligations must be approved by all the shareholders representing 100% of the company's share capital.

Other corporate actions, such as appointing and removing a director and approving the company's accounts and the directors' remuneration (see Question 32), are resolved through ordinary resolutions (see Question 33).

A shareholder(s) representing at least 33% of the company's share capital can, at any time, request the sole manager/director, board of directors or the statutory examiner to call a shareholders' meeting, to discuss matters stated in the request. If the meeting is not called within 15 days of receipt of the request, the meeting can be called by a court resolution at the shareholder's request (Article 184, General Law on Commercial Companies).

This request can also be made by any shareholder in the following cases:

In public traded companies, shareholders owning at least 10% of the voting shares can, at any time, request the chairperson of the board of directors, the statutory examiner, the company's auditors or a board committee to call a meeting to discuss relevant issues.

Any shareholder who considers that the company is being mismanaged can report this in writing to the statutory examiner(s) (if any), giving reasons and details of the alleged mismanagement. The statutory examiner will verify the report and present it to the shareholders' meeting for analysis and action.

The statutory examiner's main function is the supervision of the company's administration and operations, to protect the partners'/shareholders' interests. If a partner/shareholder suspects that the company is being mismanaged, they can propose the appointment of a statutory examiner to the partners/shareholders meeting.

If actions led by or taken by the directors affect or impact the company's value, shareholders representing at least 25% of the share capital of stock companies, or 5% in public traded companies, can bring a civil action against the director(s) involved.

In stock corporations and limited companies, Mexican law does not provide specific guidelines or requirements relating to internal control of business risks for directors. However, it is common for managers and boards to provide guidelines and protocols on these matters.

In public traded entities, the board of directors must follow up on risks based on information provided by the board committees, general manager, officers and external auditors (Article 28(V), Securities Market Law).

At the annual shareholders' meeting, directors must present the annual report with the company's financial statements, balance sheet and other financial documentation for the previous financial year. If this is not presented at least 15 days before the annual shareholders' meeting, the shareholders can remove the directors from their position and bring a civil liability action against them for not complying with their duties.

Under the Securities Market Law, a director who alters or modifies the company's accounts, or the destination of economic resources, is liable to penalties including imprisonment and fines, and can be subject to administrative actions.

A company's accounts must be audited by a certified accountant or an independent auditor if:

In addition, if tax regulations consider the company to be a special taxpayer and require its financial information to be audited, this will be required by law.

A special taxpayer is any person, natural or legal, qualified as such by the Tax Administration (SAT) through a substantiated resolution. This designation is based on, in particular, the volume of economic activities reflected in the taxpayer's turnover.

Special taxpayers, taking into account this status and the volume of their trade, are subject to specific rules for performance of their formal duties and payment of their taxes, including to audit their financial statements.

In practice, stock corporations and limited companies often do not audit their accounts and financial information presented to the shareholders' meeting.

The board of directors appoints the company's auditors.

Although there is no formal legal limit on the length of their appointment, the Corporate Governance Code recommends changing the auditors every five years, to maintain their independence from the company.

Auditors of public traded companies must:

Article 343 of the Securities Market Law provides that auditors should be independent from the company, with no other relationship or economic links.

Auditors must comply with the same test of independence as applied to independent directors (see Independence).

The Corporate Governance Code recommends that the fees paid to the auditors should not exceed 10% of the total income they receive in the auditors' firm, to maintain their independence.

The CNBV has issued general provisions applicable to entities and issuers (including public traded companies) supervised by the CNBV that hire external audit services for basic financial statements (CNBV General Provisions). Among other things, they extend the above requirements to the hiring of auditors' services.

Auditors hired in public traded entities cannot perform other work for the company they audit accounts for (Corporate Governance Code and the CNBV General Provisions).

Under Article 347 of the Securities Market Law, the auditors of public traded companies are liable for damage caused to the company if:

This liability can be excluded if they act in good faith and without intent, and they give their opinion either (Article 348, Securities Market Law):

The secretary of the board of directors is usually the secretary of the shareholders' meeting. This involves several duties such as attending all shareholders' meetings, counting the number of shares present, recording resolutions and noting decisions taken in the meeting. The secretary also keeps the company's corporate ledgers and must register all resolutions in them.