On September 12, 2023, the Mexican senate approved the amendments to the General Corporations Law (the Law) to allow the holding of shareholders and partners’ meetings through instant communications platforms (the Amendments).
The document containing the Amendments was sent to the Mexican president for his approval (promulgation) before it is published with the Federal Official Journal to enter into force.
The Amendments seek to facilitate the holding of meetings with the help of electronic means based on the experiences that the Covid-19 epidemic left. That is, allowing instant communication between people through electronic platforms as well as giving the same validity to both the meetings held in person and virtually.
The Amendments contemplate various additions and changes to the Law to include the following rules:
● Partners and shareholders must include in the articles of incorporation the rules for the holding of meetings either in person or virtually. Provided that in the latter case, the interaction between the attendees is simultaneous and they may communicate functionally in an equivalent manner as if the meetings were held in person.
● The articles of incorporation must contain all the rules to allow the access, identity accreditation and vote of the partners, creating evidence of that.
● Directors will have the choice to hold their meetings by electronic instant communication platforms, either totally or partially.
● In case the articles of incorporation of an entity allow the holding of a meeting with the help of electronic instant communication platforms, it won’t be regarded as held outside the corporate domicile. Before the coming into force of the Amendments, holding a partners’ meeting outside the corporate domicile has been a cause of invalidity.
● Meetings may be held outside the corporate domicile, provided that all the partners agree, and instant electronic communication platforms are available.
● Calls to meetings of limited liability companies –sociedades de responsabilidad limitada- shall also be published in the Economy Department’s electronic system.
● The articles of incorporation of limited liability stock entities -sociedades anónimas– may also include provisions as to the holding of meetings through instant communication platforms, either totally or partially; having the same validity than those held in person.
● Regarding limited liability stock entities, if meetings are held by electronic platforms, they will not be regarded as held outside the corporate domicile.
● Meetings of limited liability stock entities may be held outside the corporate domicile without being necessary to justify such a decision with force majeure events or acts of God, provided that all the partners agree on that, and instant electronic communications platforms are available.
● Shareholders’ meetings minutes may contain both electronical signature or handwriting signature of the president and secretary as well as statutory auditors.
According to the legislators, the Amendments are convenient to complement the Law in benefit of businesses. Likewise, the Law will be adapted to the technological innovations and the benefits that distance communication offers. The senate concluded that the approval of the Amendments aims at “granting legal certainty and enabling the use of technological tools for the entities to perform their activities more efficiently”.
Challenges and final remarks
The Amendments seek to make more practical the holding of meetings virtually by taking advantage of the technological platforms currently available, conferring the same validity to meetings held both in-person and virtually.
Although, the choice for shareholders and partners to hold meetings virtually might facilitate the making of decisions, it also raises questions that the Amendments themselves do not answer. It will be up to the companies to address them properly.
As of today, one of the causes for a shareholders’ meeting to become invalid is that it is held outside the company’s corporate domicile, except when this is due to force majeure events and Acts of God.
Such invalidity will no longer apply when the Amendments become effective if the shareholders agree on holding the meetings outside the company’s corporate domicile and the bylaws allow the choice to hold meetings through instant communication platforms.
It seems that for the validity of the meetings held virtually, the bylaws should not only allow them to be held that way, but all the shareholders must also consent to it before the meeting takes place. Otherwise, the affected shareholders might have a cause of action to combat the resolutions adopted by the meeting installed without a previous agreement by all the shareholders.
The required previous consent by all the shareholders might be a hurdle to hold meetings through instant communication platforms in the manner seek by the legislator. Therefore, the purpose of the Amendments would be difficult to achieve having the partners to overcome these types of obstacles.
The articles of incorporation of new entities as well as the bylaws of existing companies must include the actions to solve interruptions or failures on the platforms during the holding of a meeting. This is with the purpose of establishing rules to continue or end virtual meetings when such failures and interruptions occur.
Shareholders might face another challenge when the Amendments come into force: controlling the involvement of unauthorized individuals during the holding of a virtual meeting, that otherwise may not be an issue if the meeting is held in person, because in the latter case unauthorized individuals might be easily identified and prevented from accessing the meeting.
Partners and shareholders must also address security concerns on some instant communication platforms through which virtual meetings are held. Confidential information shared during the holding of the meetings should be protected as well.
When drafting the adjustments of existing entities’ bylaws and new corporations’ articles of incorporation to align them with the Amendments, partners and shareholders are advised to consider the above suggestions. Otherwise, not only the chances to create misunderstandings between shareholders and/or directors will increase, but also the success rate of claims challenging the validity of resolutions adopted by virtual meetings will do.
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