Everything You Need to Know About the General Law of Commercial Companies

#### General Law of Commercial Companies The [general law of commercial companies](https://controlterrestre.com/glosario/ley-general-sociedades-mercantiles-definicion-glosario) (LGSM) is one of the most important legislative pieces in Mexico's commercial law framework. This law regulates the constitution, operation, and dissolution of commercial companies, providing a clear and structured legal framework for the creation and management of various forms of commercial entities. In this blog, we'll explore in depth the key aspects of LGSM, its types of companies, and their most relevant characteristics. ##### **What is the General Law of Commercial Companies?** It is a set of norms that regulate commercial companies' activities in Mexico. It was enacted on August 4, 1934, and has been modified several times to adapt to the changing needs of the business environment. Its main objective is to establish legal bases for commercial companies' creation, operation, and dissolution, ensuring transparency and protection of partners', shareholders', and third parties' interests. ###### **Types of Commercial Companies under LGSM** LGSM contemplates several types of commercial companies, each with specific characteristics and requirements. Below, we describe the most relevant ones: **Corporation (S.A.)** The Corporation is one of the most common forms of business organization. It's characterized by having capital divided into shares and partners' responsibility is limited to the amount of their contributions. This type of company is ideal for businesses seeking to attract investment through share sales. ##### **Characteristics:** - Capital divided into shares. - Responsibility limited to the amount of subscribed shares. - Administration can be in charge of a board of directors or a single administrator. - Important decisions are made in shareholder meetings. ###### **Limited Liability Company (S. de R.L.)** The Limited Liability Company is another popular form of company, especially among small and medium enterprises. It's characterized by having capital divided into social parts and partners' responsibility is limited to the amount of their contributions. Characteristics: - Capital divided into social parts, not shares. - Responsibility limited to the amount of contributions. - Partners can participate directly in company management. - Decisions are made in partner meetings. ###### **General Partnership** This type of company is characterized by partners' unlimited and joint responsibility for social obligations. It's a less common form of organization due to the high responsibility it implies for partners. Characteristics: - Unlimited and joint responsibility of partners. - The company name must include the name of one or more partners. - Decisions and administration are carried out directly by partners. ###### **Limited Partnership Simple and by Shares** Limited Partnership can be simple or by shares. It's characterized by having two types of partners: general partners, who have unlimited responsibility, and limited partners, whose responsibility is limited to their contributions. Characteristics: - Two types of partners: general partners (unlimited responsibility) and limited partners (limited responsibility). - In limited partnership by shares, capital is divided into shares. - Administration is generally in charge of general partners. ###### **Cooperative Company** The Cooperative Company is a form of organization where partners associate to satisfy common needs. Its main characteristic is equality in decision-making and partners' participation in benefits and company management. Characteristics: - Equality in decision-making. - Equitable participation in benefits. - Partners have active participation in company management. ###### **Constitution Process of a Commercial Company** Constituting a commercial company under the General Law of Commercial Companies involves several essential steps: 1. Company type choice: The first step is deciding what type of company is most suitable for business objectives and needs. 2. Articles of incorporation elaboration: This document must contain company statutes, including name, corporate purpose, duration, share capital, and administrative structure. 3. Registration with Ministry of Economy: Articles of incorporation must be registered in the Public Commerce Registry to publicize company constitution. 4. Obtaining permits and licenses: Depending on commercial activity type, additional permits may be necessary. ###### **Partners' Obligations and Rights** It establishes both obligations and rights for commercial company partners: **Obligations:** - Capital contributions: Partners must make capital contributions agreed upon in articles of incorporation. - Statute compliance: Partners must comply with provisions established in corporate statutes. - Assembly participation: Partners must participate in assemblies and meetings, contributing their vote and opinion in important decisions. Rights: - Profit participation: Partners have the right to a proportional share of profits generated by the company. - Information and transparency: Partners have the right to be informed about company progress and access company records and books. - Assembly vote: Partners have the right to vote in assemblies, influencing company decisions. ###### **Dissolution and Liquidation** LGSM also regulates commercial companies' dissolution and liquidation process. Dissolution causes can include expiration of term set in statutes, impossibility of carrying out corporate purpose, or partners' decision. Liquidation Process: 1. Liquidator appointment: Partners must appoint one or more liquidators to handle the liquidation process. 2. Inventory and balance: Liquidators must prepare company inventory and balance. 3. Debt payment: All company debts and obligations must be paid. 4. Remainder distribution: Once debts are paid, the remainder is distributed among partners according to their participation in share capital. ###### Us At Control Terrestre, we understand the importance of efficient and professional management of your commercial company, especially in the logistics field. We offer specialized logistics services that can be essential for your business, whether in export, import, or national merchandise distribution. Our commitment is to ensure your company operates smoothly and efficiently, complying with all regulations and making the most of market opportunities. Contact us today to discover how our logistics services can support your commercial company's growth and success.