Advantages of the Preparatory Means to Trial in Mexico for the accountability of a society

Executive Summary:

• In every public limited company there are those who are obliged to provide accounts and documentation both on a regular basis and when requested by a shareholder. The obligation to do so is particularly important for directors and shareholders, but not exclusively so.
• In practice, cases are often observed where the subjects obliged to do so do not do so, or attempt to comply in an incomplete or derisory manner, thus hindering the rights of a shareholder to know the information of the company of which he is a part.
• In commercial legislation, there are processes called "Preparatory Means for Trials", which, in the case of obtaining accounts or documentation from a company for a shareholder, present considerable advantages as opposed to a direct trial.

Introduction

Accountability, in general, is an action that corresponds to the person who has a legal link by which another is obliged to inform him of the way in which he has managed the assets or the representation or management carried out by the other.

In a corporation, those obliged to account to the shareholders are mainly the directors, the auditor and the partners themselves, among them. However, recently the Judicial Courts in Mexico have interpreted criteria that it is also feasible to request information or documentation directly from the company itself (hereinafter "Obligated Subjects").

As an example, and in the specific case of administrators, it is mentioned that, by express provision of the General Law of Commercial Companies ("LGSM"), they must present an annual report to the Shareholders' Meeting, whose requirements highlight that it must contain: (i) the state of the financial situation, (ii) the results of the exercise, (iii) social heritage, among others.

Occasionally, the case arises where Obligated Subjects do not exhibit or are not transparent with the information and/or documentation of the company when requested to do so by a shareholder, despite the latter formally requesting it.

Considering the material difficulties that a shareholder has in obtaining the information or documentation to which he is entitled when faced with refusals from those who have it, the filing of Preparatory Means for Trial (“MPJ”) appears to be a great alternative solution.

Developing.

MPJ are those pre-trial procedures that tend to provide those who promote them with elements of knowledge or evidence that allow them to promote a subsequent trial.

The possibility of filing MPJs by a shareholder against the Obligated Subjects is based on section IV of article 1151 of the Commercial Code.

The MPJ on accountability begins with an initial writing of the shareholder - justifying such character - before the competent Commercial Judge and with respect to the Obligated Subjects that prove they are suitable to provide what is intended.

Procedure that presents the following notable advantages compared to a traditional trial:

Advantages

• From the admission of the procedure, the Judge orders to personally notify the Obligated Subjects subject to the process and requires them to present to the Court within a certain period the information and documentation requested by the shareholder, thus avoiding processing a complete trial for this.

• The Judge has express powers in the Commercial Code to warn the required persons about applying any means of coercion that he deems appropriate to enforce his determination, in the event of unjustified refusal.

• The release of some MPJ first and the effective obtaining of the required information, allows the shareholder to promote, if applicable, the corresponding claim with greater evidence and have more clarity about their rights to claim, such as, for example, accounting or financial information related to the progress and operation of the company.

• Currently, there is greater rigor from the Judicial Authorities to ensure that accountability is fulfilled, so it is not enough for the Obligated Subjects to "display diverse information" but, for example, in the case of financial information, it must be accompanied by supporting documents and possible verification. What turns out to be more practical is to revert to some MPJ if such an attempt occurs.

• The resolution that admits a MPJ does not admit an ordinary appeal and, in fact, the Judicial Authorities have established in recent criteria that the challenge of a MPJ, through an Indirect Amparo Trial, only proceeds until the last resolution is issued. The above with an exception if the judicial determination materially affects substantive rights.

Conclusions.

The MPJ is an ideal process for a shareholder to judicially obtain the accounting and documentation that he/she wants from the Obligated Subjects, unlike a traditional trial. It is notable for the agility that is available from the beginning of the procedure to obtain what is sought, as well as the regulatory discretion that the Judge has to make his/her determinations effective in the event of omission.

Despite the above, it should also be mentioned that the Obligated Subjects required in a MPJ also have the right to present an opposition before the Judge regarding the request, which will correspond to the Judge to assess whether this is sufficient to refrain from continuing with the MPJ, or whether the opposition is not admissible and the MPJ is continued.

Finally, for more information on a Preparatory Means for Trial on a shareholder's right to accountability or documentation, we invite you to contact our experts.