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PDI International Services
S.A.P.I. DE C.V. S.O.F.O.M., E.N.R.

Mexico offers the standard models for business organization, including the corporation (sociedad anónima-SA), the corporation with variable capital (sociedad anónima de capital variable-SA de CV) and the limited-liability company (sociedad de responsabilidad limitada-SRL). Several other forms of organization (like the sociedad en nombre colectivo and the sociedad en comandita por acciones) are suitable only for small operations.

Some companies, such as private-equity firms, have embraced the use of a new corporate legal entity established in 2006, known as a sociedad anónima promotora de inversions, sociedad financier de objeto multiple (S.A.P.I. S.O.F.O.M.), for their investments. The S.A.P.I. S.O.F.O.M. form provides greater legal protection for minority shareholders by allowing special provisions in the byelaws, namely 'drag-along' and 'tag-along' rights (minority investors who find a potential buyer may 'drag along' fellow shareholders, or 'tag along' should the latter find a buyer.) S.A.P.I. S.O.F.O.M. allows investors with a minority stake to enter and exit investments more easily. The S.A.P.I. S.O.F.O.M. was conceived as a stepping stone to prepare Mexican companies for an eventual initial public offering (IPO) on the local stock exchange. An IPO is a commonly sought exit strategy for private-equity and venture-capital funds.

S.A.P.I. S.O.F.O.M. can:

• Realize the habitual and professional methods to grant credit, as well as to celebrate leasing and financial agreements.
• Celebrate contracts to open simple credits or credit accounts with or without guarantee.
• Obtain loans and credits from credit institutions, insurances and deposits from all the country or financial institutions of the exterior.
• Create or constitute deposits.
• Provide services of administration.
• Acquire shares, interests or participations in other mercantile or civil companies.
• Issue all kinds of credit titles.
• Acquire or lease all kinds of properties or real estate assets.
• In general execute all kind of activities or agreements that are authorized by the Mexican Law, the “Ley General de Organizaciones y Actividades Auxiliares del Crédito”.

The main economic right of a shareholder of either a S.A. or a S.A.P.I. S.O.F.O.M. is the right to get a dividend.

Under the Law, generally speaking, a shareholder of a S.A. has the right to receive dividends in proportion to the amount of the legal capital contributed. The only exception to this principle is for preferred stocks. Preferred shareholders have rights to a higher dividend, but have limited voting rights.

Under the New LMV, the By-Laws may create different classes of shares, each one with different rights.  The right to a higher dividend or a different way to calculate it can co-exist with full voting rights.

The main corporate right of a shareholder is the right to vote and participate in the shareholders’ meetings.

The S.A.P.I. S.O.F.O.M., on the other hand, are allowed to issue shares with rights to vote on any matter. SAPIs may also issue shares with limited votes on certain matters. Finally, S.A.P.I. S.O.F.O.M. can issue shares with no right to vote on any matter. Under the New LMV, all these classes of shares can be defined and set forth in the Bylaws.

The main difference between a S.A. and a S.A.P.I. S.O.F.O.M., for purposes of legal capital rules, is that under the LGSM, a S.A. may not repurchase its own shares. Under the New LMV, by contrast, a S.A.P.I. S.O.F.O.M. may repurchase its own shares, and keep them as treasury shares. S.A.P.I.’s may also re-issue shares they have bought back. The law allows the Board to decide all buy-back issues. Shareholders do not have to be consulted for these purposes. Thus, S.A.P.I. S.O.F.O.M. rights are allocated the same as in a public company in this regard.

In summary , the S.A.P.I. S.O.F.O.M. is a new legal alternative for privately-held companies. All investors, controlling and non-controlling, acquire rights and obligations which allow them to have much more control and transparency than before, while allowing for a better alignment of interests among shareholders. It also creates incentives for founders and/or controlling groups to attract outside private equity, and even lets incoming venture capitalists establish rules to secure their equity.