Improving corporate governance in Mexico

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A new securities law could help dramatically raise Mexico’s corporate governance standards, which ranked a dismal 125th in the world in Doing Business’ most recent index of investor protection and corporate governance standards.

The new law introduces a new type of corporation, called a SAPI (sociedad anónima promotora de inversion), that gives much clearer rights for minority shareholders than other limited liability Mexican companies do. Companies can become SAPIs, but once they do, they have three years to list on an exchange. SAPIs will give minority shareholders more protection. For instance, investors will need fewer votes to call a meeting, and it will be easier to file a civil legal action or to oppose a resolution from a shareholders' meeting. SAPIs will also impose duties of care and loyalty on company directors, improve corporate financial reporting, and make clearer, harsher penalties for violations such as insider trading.

While this is certainly a step in the right direction for Mexico, it will be interesting to see how the courts interpret the new securities law requirements, especially in the context of various existing companies laws.

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