Legal Reform: Ability to hold Shareholders’/Partners’ Meetings and Board of Directors’ Meetings remotely through electronic means
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On October 20, 2023, a decree was published to reform and add several provisions of the General Law on Commercial Entities (Ley General de Sociedades Mercantiles) (the "Law") to allow the use of electronic means for the holding of Shareholders’, Partners’ and Board of Directors’ meetings (the "Reform Decree").
What does the Reform Decree consist of?
The Reform Decree amends the rules to hold shareholders' or partners' meetings and board of directors' or managers' meetings of corporations (sociedades anónimas) and limited liabilities companies (sociedades de responsabilidad limitada), so that they may be held in person or virtually by means of any electronic or optical device or any other technology ("Electronic Means").
When was the Reform Decree published and when will it become effective?
The Reform Decree was published on October 20th, 2023 and became effective on October 21st, 2023 (except for the amendments related to partners' meeting's calls of limited liability companies (sociedades de responsabilidad limitada) through their publication in the electronic system of the Ministry of Economy (Secretaría de Economía), which will become effective six months after October 20th, 2023).
What are the requirements for holding virtual shareholders'/partners'/board of directors' meetings?
- The company's bylaws need to contemplate that possibility;
- The Electronic Means must allow for the participation of all or part of the attendees by such means in the applicable meeting or session;
- The participation must be simultaneous and allow for interaction in the deliberations in a manner functionally equivalent to a face-to-face meeting; and
- There must be mechanisms or provisions that allow the access, identification of the attendees, and, if applicable, confirmation of their vote and the generation of the corresponding evidence.
How can the calls to meetings be made?
Calls to meetings must be made through the publication of the call in the electronic system of the Ministry of Economy, with the anticipation established by the bylaws or, in the absence of such provision, eight days in advance in the case of limited liability companies, or 15 days in advance in the case of corporations. The novelty is that, prior to the reform, the publication of the call in such electronic system was only contemplated for corporations, not for limited liability companies.
In the case of annual ordinary general shareholders' meetings of corporations, the reports of the board of directors referred to in Article 172 of the Law regarding the performance of the company and its financial statements must be available to the shareholders, either in the company's offices, or, as per the reform, through any electronic or optical device or any other technology determined for this purpose in the company's bylaws.
Can the meetings be documented by Electronic Means?
The General Shareholders’ Meetings must be documented in minutes, which must be recorded in the applicable corporate ledger, and must be signed either with wet ink or by electronic signature, by the President and by the Secretary of the meeting, as well as, where appropriate, by the examiners that attend. The documents evidencing that the calls were made in compliance with the requirements established by the Law must be added to the minutes.
Is there still a requirement for partners' and shareholders' meetings to be held at the corporate domicile?
The reform gives flexibility to the requirements for holding meetings at the corporate domicile; if they are held by Electronic Means, it will not be deemed solely for such reason that the meeting was held outside of the corporate domicile.
Additionally, shareholders' meetings may be held outside of the corporate domicile even in the absence of force majeure, so long as all the shareholders approve it and there is also the possibility to use Electronic Means for such meetings. The meeting minutes must include the domicile where the respective meeting was held.
Each company must assess, according to its particularities, the convenience of amending its bylaws to include the possibility of holding shareholders', partners' or board of directors' meetings remotely, and of allowing the electronic execution of minutes.
With respect to the electronic signatures in the minutes, companies should verify that they comply with the requirements in the Code of Commerce for simple or advanced electronic signatures, to avoid potential challenges, as well as compliance with NOM-151- SCFI-2016 regarding the preservation of data messages and digitization of documents.
Given the recent effectiveness of the Reform Decree, it is still pending to verify whether the practice of recording video calls or video conferences can be judicially challenged as a means to allow the verification of the identity of the attendees, the confirmation of the vote and that its recording is sufficient evidence admissible in trial.
Companies should bear in mind the obligation under Article 27, paragraph B, section V of the Federal Tax Code, which requires the recording in the partners' and/or shareholders' corporate books of the federal taxpayer's registry of each partner and shareholder and, in each meeting minutes, the tax ID number of the partners or shareholders who attended the meeting.
Santiago Ángeles (White & Case, Trainee Lawyer, Mexico City) contributed to the development of this publication.
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This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.
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