BANK TRUST

The Trust (FIDEICOMISO) is a contract in which a person, the settlor (FIDEICOMITENTE), transmits the ownership of economic assets to an institution (FIDUCIARIO) so that it can manage them and be assigned to a third party, the trustee (FIDEICOMISARIO), according to the time indicated in the contract.

It works as a legal support framework to assign economic benefits that arise from the possession of certain assets. It is a way of allocating goods, and it serves as an instrument of donation in life, and to establish last wills. But they still help to keep the assets of any creditor protected; owners of new assets rely on trusts to minimize and avoid loss of assets.

In the event that a foreigner wants to acquire a property, the trust establishes a legal basis in which the bank retains the property on behalf of the foreigner but assures all the rights and privileges of property for the foreigner. It is a protection system established by the Mexican Government for the bank to verify that the purchase process is safe.

 

 

What are the benefits of the trust?

Managed assets cannot be seized, nor do they have commercial risk.

The settlor may designate several trustees who receive the trust simultaneously or successively, according to cases provided by law.

It is a tool for access to credit and works as a risk isolator by creating an autonomous heritage.

The security that the Bank Trust contract will be formalized with a Bank, being the acquirer, who is going to be denominated in the contract as the trustee, who will determine who will be the recipients of the land, that is perfectly established who can make use, joy and enjoyment of the property.

That the Bank Trust contract will be signed on a public deed, in front of a Mexican notary, and that should be mandatorily subscribed on the Property Public Register.

The Acquirer/trustee will term one or more persons that will be the substitute trustees (also called recipients) in case of the death of the acquirer, those who can be changed at any moment by the trustee.

In case of the trustee’s death, the substitute trustees do not need to appear at trial in México or outlands, to be recognized as the headlines of the benefits, since they were already signed on the trustee’s contract as the substitutes; so that said recognition will be lithe, quick and low cost, always respecting the will of the trustee and their ultimate designation of the substitute recipients and their percentages.

The Bank Trust will also be subscribed into the National Registry of Foreign Investment.

The property subject to the Bank Trust can be mortgaged by express instruction of the trustee.

The fiduciary can only act by express instruction of the trustee.

The possibility of selling their property through a cession of rights to another foreigner, by the moment that he instructed it, being this mandatorily made in front of a Public Notary in México, for the security of the seller and the property’s buyer.

Ease in the credit’s obtained with the financial entities for the trustees.

Low annual fee.

 

 

How does the fiduciary intervene on the Bank Trusts? 

 

The fiduciary (bank) will keep the ownership of the Bank Trust’s property and only by the trustee’s instruction -through and instruction letter-, will perform the requested application for the transmission of the property, cession of fiduciary rights, name of the recipients, Bank Trust extinction, etc.

Through an instruction letter, can request to the Ministry of Foreign Affairs the extension of the trusted subject, or, in the case of the Bank Trust, due that in the current law, the extent of the Bank Trust is extended only to fifty years.

The fiduciary should notify the Ministry of Foreign Affairs, as well as the National Registry of Foreign Investment, about any modification to the original contract of the Bank Trust, including the complete extinction, between a lapse of 40 business days.

In case of need, the Fiduciary can confer power for litigation, collection and administration acts, for the defense of the Bank Trust’s heritance to the physical person/persons assigned by the trustee, previous trustee’s instructions.

 

 

BANK TRUST'S CONSTITUTION PROCESS

 

Once the foreigner has chosen the property to be acquired, they must provide to the fiduciary all the requested documentation and payments, to begin with the registration process on the public notary. VALERO ABOGADOS takes care that the documentation is legal, and that the property is free of any encumbrance or seizure that can affect the fiduciary.

When all the correspondent documentation and fiduciary’s payments are given, the license procurement will begin with the Ministry of Foreign Affairs in México and with the fiduciary’s internal business agent. The average time to get the permission is fifteen business days.

At the same time, the fiduciary will request to the trustee’s chosen notary, the elaboration of the Bank Trust’s contract project, the fiduciary will send the permission to the notary so he can transcript it in the Bank Trust’s Constitution deed.

Once the permission has been obtained from the Ministry of Foreign Affairs, the fiduciary will send it to the notary so he can transcript it into the Bank Trust’s Constitution deed.

The notary will prepare a deed’s project and it will send it to revision and approval to the Fiduciary.

Once the deed’s project is approved by the Fiduciary and having all the payments and documents required by the Fiduciary and the Notary, an appointment is settled for the sign of the contract on the correspondent notary.

At the moment of the signature, the Notary should provide a certified copy to the Fiduciary so he can register it into the National Registry of Foreign Investment; the mentioned Bank Trust and a certified copy to the trustee. Once he registers it into the Public Registry of Property, he will provide to the Fiduciary the original of the First Testimony.

The Fiduciary will register the Bank Trust to the National Registry of Foreign Investment.

It will be assigned a number to the constituted Bank Trust, for its identification and it will also be assigned an account number so the trustee can make the payment of the commissions agreed in the contract.

 

 

BANK TRUST'S FEES 

 

The charges that correspond to the payment of federal rights:

In the cases of Registration and Permission, they do not have a charge for the Fiduciary’s transaction.

The permission charge is the updated and established by the Ministry of Foreign Affairs for the payment of Federal Rights. In case that the Ministry makes a requirement about the documentation, it will need to be paid modification of admissions new request charges. (At the present time 15,995.00 Mexican pesos).

Since January 2011, the register to the National Register of Foreign Investment does not have ANY CHARGE.

The charges for the public notary will be agreed between the foreigner and the notary’s personal.

Fiduciary’s fees for the open of a new Bank Trust (In American dollars):

 

BANCO DEL BAJÍO.

400.00 dollars + IVA for the sign of the contract *

450.00 dollars + IVA for the first annuity*

 

SCOTIABANK.

600.00 dollars + IVA for the sign of the contract *

600.00 dollars + IVA for the first annuity *

 

 

Commercial Society 

It is a subject gifted with a legal personality, different from the physical’s persons that form it. In the same way that the natural persons (physical), the societies or the collective entities (moral persons), have a legal personality that can be identified as subjects of rights and duties.

This way we can say that a Commercial Society is the agreement made between two or more persons for the realization of a common goal, through the capital contribution in money or specie and according to the legal framework established, with legal personality different to those that belong to the members that conform it and with defined rights and duties for its performance.

The persons that conform a commercial society can be:

Physical persons

Moral persons

The physical person, also called a natural person, is any man or woman with the capacity of enjoyment and execution.

The moral person is an entity formed by two or more physical persons, for the realization of collective goals, that the law recognizes with the capacity to have rights and duties.

The commercial societies are those recognized by the General Law of Commercial Societies in his first article, fraction I to VI. In its second article, first paragraph, the mentioned law says:

“The commercial societies registered into the Public Registry of Commerce have different legal personalities from their members…”.

It is important to emphasize that in order to consider a society as commercial, independently of the activity or goal that is chasing, it must be constituted to accomplish each requirement established by the General Law of Commercial Societies.

The physical or moral persons that join a society must contribute with cash, species, knowledge, work or the combination of all of it, searching for a licit goal, mainly economical. The persons that conform to a commercial society, are mutually forced to give notification of each operation that this one realizes through every fiscal exercise. The social exercise will concur with the year of the calendar (from January 1 to December 31); with the exception of the first social exercise: if the society is constituted after January first, it will start on its constitution date and it will conclude on December 31 of the same year.

 

ADMINISTRATION:

The administration can be trusted to one administrator (single administrator), more than one administrator (it should be pointed on the statutes the minimum and maximum) or to an Administration Council (three or more). If, on the contrary, it is required the joint action of at least two or more of them, they will be considered joint administrators. The Administration Council can delegate every or a few of their faculties into one or more of their members, who will take the denomination of CEO, and it must determine the limitations of how those faculties will be executed.

 

 

COMMERCIAL COMPANIES CLASSIFICATION:

The commercial societies can be classified from different perspectives:

 

PARTNERS’ RESPONSIBILITIES:

a) Limited responsibility companies: “Those where the partners respond to the social obligations up to the amount of their contributions, that’s the case, as for example, of the anonymous society, the limited responsibility society, etc.”

b) Unlimited responsibility society: “Those where the partners responding to the social obligations even with their personal properties, as, for example, a society with collective name”.

c) Mixed responsibility society: “Those where one or more partners respond to the social duties in a limited form, and another or other partners respond unlimitedly, as for example a simple limited partnership”.

 

VARIABILITY OF SOCIAL CAPITAL:

a) Unswerving capital society: “Those in which in order to increase or decrease the amount of the social capital, it is needed, in general terms, to accomplish the following requirements:

Celebrate extraordinary assembly.

Record the correspondent Extraordinary Assembly minute.

Protocolize the minutes.

Register the minutes in the Public Commercial Registry”.

b) Variable capital society: “Those in which the amount of social capital can be increased or decreased without accomplishing the previous requirements, as long as this increase doesn’t exceed the authorized capital (minimum limit), because on the contrary must accomplish the unswerving capital requirements”.

c) Limited responsibility society:

It is a type of commercial society in which the responsibility is limited to the contributed capital. The capital will be formed by the contributions of all the partners, divided on social participations, indivisible and cumulative.

d). Anonymous Society.

Contract in which two or more persons force themselves to put in common money, benefits or industries, with the spirit of work in common and to share the gaining’s. With legal personality in which the capital, divided in actions, it is formed by the partners’ contributions that don't personally belong with the social debt.

 

 

CONSTITUTIVE PROCESS OF A COMMERCIAL COMPANY

 

The constitutive process of a commercial company can be resumed on the following steps:

1. Formulate a project of the social contract.

2. Request the permission for the constitution of the company to the Ministry of Foreign Affairs.

3. To obtain the enunciated permission of the previous point.

4. Go to the public notary and at the same time, to prepare the outright social contract.

5. To protocolize to the public Notary, the social contract.

6. The public notary will register and register the social contract to the Commercial Public Registry.

 

The permissions that the Ministry of Foreign Affairs provide for the constitution of the commercial societies can be of three types, according to the June 29 act, to the Organic law, fraction I of the 27 act:

1. Foreigner exclusion article society: That is authorized by the article 8 of the mentioned regulation, which says: “None foreign person, moral or physical, can have a social participation of the company or to be owner of the actions of the company. If by any reason any of the previous mentioned persons, by any reason or event, come to acquire a social participation or to be owner of one or more actions, being then against the said on the previous paragraph, it is agreed that the mentioned participation will be invalid and accordingly, the mentioned social participation will be cancelled and considered without any value, as well as the titles that represented it, being the social capital considered decreased in an equal quantity to the value of the cancelled participation”.

This type of commercial society doesn’t need the permission of the Foreign Affairs Ministry to celebrate contracts with any government appurtenance, may their actions be to the bearer.

2. Foreign Investment Company: This society will be considered Mexican for all the effects of the National Commission of Foreign Investment, should be inserted on the constitutive deed the following statute: “All of the foreigners, that in the constitutive act or at any following moment, acquires an interest or participation in the society, will be considered by that simple fact as a Mexican regarding one and other, and it will be understood that they agree in not to request their government protection, under penalty, in case of missing their agreement, on losing the said interest or social participation in benefit of the Mexican nation”.

 

 

CHARGES AND TIME 

a) For the creation of the commercial company, as it was mentioned before, a permission is requested from the Economic Ministry, for electronic media, for which the client should provide three different names to request. The authority lasts up to three days to answer, in case that the name is already in use, it will be needed to make a new request. This procedure doesn’t have any charge.

b) Once that the name is authorized, it proceeds to realize the constitutive act to the public Notary, which can last up to a week. The notaries’ fees can oscillate, but the average is of 25,000.00 Mexican pesos, including the payment for the rights to register into the Public Registry of Property and Commerce.

The investor will have to hire the services of a public accountant for the elaboration of the monthly and annual declarations, those which should have to start being elaborated the same month of its creation, as well to register the company into the National Registry of Foreign Investment and to obtain the Federal Registry of Taxpayers number. This process has an average cost of 4,000.00 Mexican pesos.

It is important for the investor to know that an ordinary assembly should be performed each year to analyze the financial state of the society.  This act should be protocolized by the notary with an average cost of 16,000.00 Mexican pesos.

The Mexican company can start operating the day after its signature before a Notary Public, with a gain of two months from obtaining its registration in the Public Registry of Commerce.

For fiscal reasons, all the societies should open a bank account with the name of the business and through that account, make every payment that corresponds to the proper business activities, in order to deduct those outlays from their taxes.

The requirements in order to constitute a society are:

1.- Passport.

2.- Document that proves the legal stay of the foreigner.

3.- Proof of address of the foreigner. (This proof of address must be from Mexico and be in the name of the foreigner).

 

 

PARTIES INVOLVED IN THE PROCESS OF ACQUIRING A REAL ESTATE IN MEXICO

 

In order to acquire a property in México, we have diverse intermediary options. In a side there are the “Brokers” or “Realtors”, whose belong to a real state or to the developer itself; there can also participate those who process the closings, known on the real-state media as the “closers”, and, on the other side, the public notary, that provides legal certainty to the persons that are acquiring the property.

The functions of them are different, on each case:

Brokers or Realtors: They put in contact to the seller and to the buyer, they oversee the acquired property’s price with the real state or with the person who contracted the Real State service for the selling of their properties. In fact, so few of them take care of making all the necessary papers with the Ministry of Foreign Affairs and with the bank that will act as a fiduciary.

Closers: These persons offer their services to get in contact with the Brokers or Realtors, notaries and fiduciary, as well with the buyer and the seller; their functions are to request all the necessary documentation, to elaborate the Bank Trust’s contract for the property acquisition, and to carry out all the needed stagecoach for the closing of the trading. This is the part where VALERO ABOGADOS offer their services.

Notary: Their principal function is to provide trust to the celebrated act by a public deed, known as “ownership transfer,” through the Bank Trust’s constitution, that must be signed by all of the parties involved and that must have attached all the requested documentation to constitute itself.

 

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MASTER IN TAX LAW AND REAL ESTATE VALUATION

 

MILY VALERO GONZÁLEZ