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Corporation Management Powers

MEXICAN MANAGEMENT & POWERS OF ATTORNEY LAW

Below please find the general guidelines on how the administration of a Company is structured in Mexico . In order to allow you to create the structure most suitable for the management of your Mexican subsidiary, a brief description of the decision making process within such Corporation is to follow. Also, a guide line of the different kinds of powers of attorney that can be granted by a Mexican Corporation is included.

I. ADMINISTRATION OF THE CORPORATION

The administration and control of the Corporation is done by the entities listed below in such hierarchical order:

1.- Shareholder’s Meeting

2.- Board of Directors or Sole Administrator

3.- Statutory Examiner “Comisario”

4.- Operating Directors

5.- General Manager

6.- Other officers and Managers

7.- Attorneys-in-fact

1. SHAREHOLDERS´S MEETING .

It is the paramount decision making body within the Corporation. It has the authority to fully dispose of the assets of the Corporation, to appoint and remove directors, administrators, examiners, managers and any other officers, setting their retributions and to establish the general policies for the Corporation.

The Assembly decisions shall always be taken following the procedure established in the corporate bylaws to insure that the resolutions that significantly affect the existence and performance of the Corporation are taken with the vote of the appropriate number of shareholders, in which case those resolutions bound even those absent and dissident shareholders

2. BOARD OF DIRECTORS OR SOLE ADMINISTRATOR .

The Board of Directors (with no specific number required but I suggest at least three) or the Sole Administrator, usually have very ample powers to guide the activities of the whole Corporation. Typically it has the authority to perform all duties bearing all the powers of attorney described in section II below. Also, the authority of the Board of Directors or of the Sole Administrator can be restricted at will by the Stockholder's Meeting.

The decisions adopted by the Board have to be taken by ballot and following also the rules established in the bylaws. The Sole Administrator may take the same decisions by himself without having to obtain prior authorization from the Stockholder's Meeting, unless his/her power is somehow expressly restricted by the Assembly.

3. STATUTORY EXAMINER “COMISARIO”.

The examiner’s function is the supervision and auditing of the directors performance for the protection of the shareholders interests. He/she reviews and audits the financial statements and all documents, contracts and papers executed by the Corporation through administrators, directors or managers, and reports only to the Assembly.

4. OPERATING DIRECTORS.

Similar to the members of the Board, these are officers that may or may not belong to the Board. They normally act alone and not by ballot and unlike the Board, which makes decisions regarding the whole Corporation, they are usually in charge of one or more of the major areas of the Corporation (i.e. sales, production, administration. etc.). Their duties are performed based on powers given either by the Assembly or by the Board, or by specific appointments.

Their roles are not substantially modified by the fact that they belong to the Board or not. If they are Board members however, but they act separately, they have to have powers very clearly specified. Otherwise a voting from the Board of many directors would be required for every occasion.

5. GENERAL MANAGER.

Is usually the person in charge of running Hands-on the Corporation affairs, making on a daily basis the decisions related to its performance.

The General Manager typically has only the powers expressly received by the Board or the Sole Administrator. General Managers are normally endowed with the powers described in 1, a), b), and d) of section II below.

6. OTHER OFFICERS.

Other officers can be appointed either by the Assembly, by the Board or by the Administrator to perform specific activities, with or without written powers of attorney. Normally they are given those set forth only in a) and b) of section II. Some of these officers can be: Plant Manager, the Manager, Personnel Manager and the Accounting Manager, etc.

7. ATTORNEYS-IN-FACT.

Are agents of the Corporation appointed normally in writing by the same entities, to perform very specific activities. This performance is possible by the notice that grantor gives to those third parties that the appointment is going to relate with.

These attorneys in fact may or may not be officers of the Corporation (as the lawyers), and their authority shall be governed by the power of attorney granted to them. They can be granted any of the express powers described in section II, with the exception of lawyers, or only appointed orally.

Please note that unless it is expressly prohibited in the text of the power, the person who is granted a power of attorney is normally authorized to substitute it in favor of third parties within the scope of his/her authority. Since it is difficult to foresee who will be in the future the new appointees, it is important to analyze from the beginning the possibility to restrict such substitutions.

II. POWERS OF ATTORNEY

Regarding their extension, the two kinds of powers of attorney are:

a. General

b. Special

A. GENERAL POWERS OF ATTORNEY.

With a general power of attorney, the attorney in fact can carry out an undetermined number of acts. General powers may be granted however with almost any type of restrictions to exercise them. For instance, they may be only for a given subject, i.e. to defend the case of Mr. John Smith; or acts of administration only for labor matters or to execute negotiable instruments up to US$ 10,000.00 Dollars, or to be exercised jointly with another person or persons. There are four types, attending to the nature of the act to be performed to wit:

a) For suits and collections

b) For acts of administration

c) For acts of domain

d) For the execution of negotiable instruments

a)For suits and collections.

This type permits the attorney-in-fact to carry out all acts necessary to file petitions and claims before any type of administrative and judicial authorities, to pursue any kind of legal action against any person, to carry out judicial or extra judicial collections, to file complaints before criminal courts in or out trial and in general, to carry out all actions to pursue any claim that the grantor may have against third parties, as well as to do any act or procedure to defend the company in relation to any suits or claims in which it is named defendant. This is also used to request and secure governmental permits, approvals and other franchises on behalf of the Corporation.

b)For acts of administration.

This type allows to carry out the most frequent administrative and managerial acts on behalf of the Corporation, such as signing contracts, doing the acquisitions required for the Corporation during its normal course of business, executing labor agreements, hiring and dismissing personnel, appointing managers, executives and officers, and, in general, performing all activities aimed to preserve, protect and increase the assets of the grantor.

c)For acts of domain.

It enables to do on behalf of the Corporation, all acts of acquisition, pledge and disposal of goods, including purchases, conveyances and encumbrances of real estate, or of any property, and in general, the sale or otherwise disposal of any assets of the Corporation. This is considered superior in rank vis- á-vis to the foregoing, so it may be used to cover them.

d)To execute negotiable instruments.

It refers to the execution, endorsement, cash, deposit, issuance, transfer, grant and in general, disposal of any type of the Corporation's negotiable instruments, such as checks, drafts, promissory notes, stock, bonds, certificates of deposit, and any document considered by Law as a negotiable instrument.

B. SPECIAL POWERS OF ATTORNEY

A special power of attorney is the most similar instrument to a mandate. It is a "custom made" power of attorney granted exclusively for a specific matter, explicitly depicted in the document itself.

For additional information, please contact Eduardo Martinez at emartinez@lmklaw.com or dial to (++52) (664) 686.1006 extension 107 or (++52) (6664) 686-1036 (fax) at our Tijuana Offices or at (619) 595-3173 or (619) 595-3176 (fax) at our San Diego Office.

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