By Lazaro Pena Ruiz, PricewaterhouseCoopers, S.C.

Preliminary Considerations

Like most Civil Law systems that are descendants of the Roman system, the Mexican legal system bases its functionality in the codification of its laws and at the same time grants more weight to the form in which legal acts are carried out than does the Common Law system. Mexican Commercial Law does not entirely escape this tradition. Although it is governed by a “lack of formalities” principle, there are several legal acts which must be carried out with determined formality otherwise “neither binding obligation nor legal action will be produced.”[1] Consequently, the formalism in Commercial Law is constrained mostly to written form, formal  ratification or execution before a public attester, and lastly to recording the act before the Public Registry of Commerce.
 

The public attester is an officer who represents the government. He is usually a person authorized by the federation or a state to attest to the happening of an event with legal effects. The public attester authenticates both the signature of a document and its contents.

The public attester works at both the State and Federal level. The public attesters authorized by the federation are called the “Federal Public Attesters” (Corredores Públicos)[2] and the Chiefs of the Consular offices of the embassies and consulates of the Mexican State.[3] At state level, the authorized public attesters are the Notary Publics[4] and Civil Registry Registrars[5] In order for documents to be suitable to record in the Public Registry of Commerce, the documents must be issued or certified by a public attester, a judicial decree or a certification from administrative authorities.[6].

The Modern Federal Public Attester

According to the Federal Law of Public Attesters (Ley Federal de Correduría Pública, FLPA), the Federal Public Attester is an attorney who has specialized in commercial law and has passed stringent technical and practical exams regarding Mexican commercial laws and ancillary matters. Therefore the Federal Government authorized him to perform various valuable functions.[7] As it is a Federal matter, the authorization granted to the Federal Public Attesters allows them to exercise their functions across the entire country. However,  when they act merely as attesters, the government limits their territory to the state in which the Federal Public Attester established his office even though his acts may refer to matters outside his state and have effects in the whole republic.  In states of vast territorial area such as Chihuahua, Baja California or Nuevo León, it is a great advantage for the Federal Public Attesters to not have their territorial competency limited to a Municipality or district, as they can lawfully act in any part of their state. According to the FLPA, the Federal Public Attester can act as a specialist in commercial matters, providing assistance to businesses as Broker, Arbitrator, Appraiser and Public Attester. As the public attester must be skilled attorneys they can also act as legal counsel in any subject matter in which he/she specializes.[8]

This article will examine some of the functions of the Federal Public Attester which contribute to provide certainty to commercial transactions and related matters.

Brokerage

As a broker, the Federal Public Attester acts as a middleman to facilitate contract formation. He/she keeps the lines of communication open and participates in the exchange of proposals (offer & acceptance) between merchants and documents those communications. Consequently, the Federal Public Attester provides certainty to the transaction. The Federal Public Attester essentially establishes a repository to determine the quality of goods and the terms of the contract.[9]

Arbitration

Since he/she is an expert in commercial matters, the Federal Public Attester is authorized by the FLPA to act as arbitrator in the resolution of disputes of a commercial nature, either by appointment of the parties or by judicial designation.[10]In addition to being usually faster than a judicial proceeding in Mexico, the tax laws also allow the deduction of uncoverable accounts whenever an arbital procedure to demand payment has been initiated, among other requirements.[11] In cases in which the amounts are considerable, it may be less likely that the tax authorities will dispute the truthfulness of an arbitral procedure that is conducted by a Federal Public Attester due to his arbitral capacity by virtue of law, and the supervision exercised over them by the Ministry of Economy.

Appraiser

The Federal Public Attester is licensed as an expert appraiser in conformity with the FLPA to estimate, tally and value goods, services, rights and obligations submitted to his consideration, either by private request or by administrative or judicial decree.[12] Likewise, the Commercial Code provides that the appraisal rendered by a Federal Public Attester has the value of an expert appraiser’s opinion in valuation.[13] For example, the Federal Income Tax Law (ITL) provides that the taxpayers may request the performance of an appraisal by a Federal Public Attester in order to determine the conveyance value of goods.[14] This applies frequently when the title to certain machinery and equipment is conveyed from a corporation to a related party, and there is need to prove its tax value.

By applying the methodologies specified in the ITL, commonly referred to as transfer pricing studies,[15]the Federal Public Attester is authorized to assist the taxpayers with the determination of the appropriate consideration to be paid for goods in an arms length transaction based upon comparable transactions. These transfer pricing studies, validated by a Federal Public Attester, establish evidence of legal value distinct from the plain transfer pricing documentation that the taxpayer should maintain. In the event that the profit margins must the sustained in a tax litigation, the opinion rendered by the Federal Public Attester can be presented as an expert opinion without further formalities.

Public Faith

The Federal Public Attester is invested with Public Faith and Credit delegated by the Federation, hence a public attester can intervene in the formalization of legal acts of commercial nature and on those that other laws authorize him.[16] Most importantly, the documents issued by the Federal Public Attesters are deemed as truthful evidence. They are self authenticating and virtually uncontestable with certainty of a date for all legal purposes.[17]

Hence, it is possible to rely on the Federal Public Attester for the incorporation of all kinds of commercial corporations, including the subtypes established by the Investment Corporations Law (Ley de Sociedades de Inversion) and the Stock Exchange Law (Ley del Mercado de Valores), among other federal laws. Likewise it is possible to formalize the Shareholders Meeting Minutes with resolutions dealing with any matters contained in the commercial legislation such as mergers and spin-offs, increases and reductions of legal capital, amendment of bylaws, conversions, dissolutions and liquidations, as well as the appointment of officers, Directors and Statutory Examiners. In conformity with the General Law of Negotiable Instruments and Credit Transactions (Ley General de Títulos y Operaciones de Crédito), the Federal Public Attester is authorized to attest the ratification of signatures in the setting up of Trusts, including those of Guarantee, which are common instruments to secure the performance of obligations.[18] According to the same law, a non-possessory pledge agreement must be in writing, and whenever the movable property is worth more than 250,000 UDIS (Unidades de Inversion, approximately under US$ 100,000.00 at current value) the signatures must be ratified before a public attester such as the Federal Public Attester.[19]

Similarly, the Federal Public Attester is authorized to attest the execution of agreements related to Mexican vessels by which the acquisition, conveyance-assignment, the creation of real rights, transmission or extinction of property, its modalities, mortgages and liens are agreed as provided in the Admiralty and Maritime Commerce Law.[20] The same holds true with acts related to airships, such as mortgages over them.[21]

In his capacity as Public Attester, the Federal Public Attester can attest the conditions of goods and inventory, such as damages and malfunctions in such items, with the purpose of evidencing such physical conditions.[22]

Indeed, the Federal Public Attester is authorized to attest to any fact of commercial nature occurring before him including the execution of commercial agreements, the ratification of signatures, the agreement for the purchase of machinery and equipment, and the assignment of accounts receivable.[23]

Conclusion

The Federal Public Attester provides specialized legal and administrative services. Proper use of an Federal Public Attester’s services brings certainty to both commercial transactions and disputes arising there from in accordance with Mexican laws. All attorneys and businesses seeking to do business in Mexico need to learn to use these important officers. 

For more information please contact Lazaro Pena Ruiz, is an attorney in the corporate legal practice at PricewaterhouseCoopers, S.C. in Nuevo León, México. He can be reached by e-mail at lazaro.pena.ruiz@mx.pwc.com