JULY 2010 EDITION: Legal Updates
Recording of Increases and Decreases of Variable Capital at the Public Registry of Commerce
Pursuant to the General Business Associations Law, the capital of a variable capital entity that increases due to subsequent capital contributions or by admission of new partners, or that undergoes a decrease due to the withdrawal of capital, can be carried out without any formalities other than those set forth in the variable capital chapter of said law, which does not provide for the recording of such capital increases or decreases in the Public Registry of Commerce. In practice, various Public Registry of Commerce offices throughout Mexico reject or deny the recording of public instruments that reflect an increase or decrease of variable capital due to a break in the chain of entries, that is, when the sequence of entries documenting an increase and/or decrease of capital is not clear, even when the recording of such variation of capital is not mandatory. The most recurrent argument is that the entity’s capital reflected on the public instrument does not match the entity’s capital previously recorded in such registry. In order to resolve this issue, the Department of Economy has ruled, through its General Office of Business Norms, that it is inappropriate to suspend or reject the recording of public instruments formalizing an increase or decrease of the variable capital due to the lack of continuous records. Only the fixed stated capital of a business association is required to have continuous entries recorded for each variation. In case of such denial or rejection of such recording, it is advisable to approach the officer in charge of the corresponding Public Registry of Commerce in order to discuss and resolve this matter in accordance with the Department of Economy’s criteria.