Recording of Increases and Decreases of Variable Capital at the Public Registry of Commerce

July 17, 2010
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 tosubsequent capital contributions or by admission of new partners, or that undergoes a decrease due to thewithdrawal of capital, can be carried out without any formalities other than those set forth in the variable capitalchapter of said law, which does not provide for the recording of such capital increases or decreases in the PublicRegistry of Commerce. In practice, various Public Registry of Commerce offices throughout Mexico reject ordeny the recording of public instruments that reflect an increase or decrease of variable capital due to a break inthe chain of entries, that is, when the sequence of entries documenting an increase and/or decrease of capital isnot clear, even when the recording of such variation of capital is not mandatory. The most recurrent argument isthat the entity’s capital reflected on the public instrument does not match the entity’s capital previously recordedin such registry. In order to resolve this issue, the Department of Economy has ruled, through its General Officeof Business Norms, that it is inappropriate to suspend or reject the recording of public instruments formalizing anincrease or decrease of the variable capital due to the lack of continuous records. Only the fixed stated capital ofa business association is required to have continuous entries recorded for each variation. In case of such denial orrejection of such recording, it is advisable to approach the officer in charge of the corresponding Public Registryof Commerce in order to discuss and resolve this matter in accordance with the Department of Economy’scriteria.

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