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What are the primary mechanisms of corporate governance in Mexico?

Are they required by legal mandate or adopted at the discretion of the company? - Mexico adopted civil law as its legal system First of all, Mexico adopted civil law as its legal system, that is derived primarily from Roman law as set forth in the compilation of codes and statutes. - Mexico is a member of OECD Mexico is a member of OECD that is an organization that sets out principles of corporate governance. The principles set out the right of shareholders, the responsibilities of the board, the role of stakeholder and etc. This principles set by OECD is a guidelines or recommendation for each member and it is not mandatory for the member to adopt the guidelines. Roles and responsibilities of shareholder

First of all, shareholders are responsible to register all shares by deposited in central depository or indeval. It is also the shareholders responsibility to attend meetings in order to vote. Voting the member of the board is the main role of shareholders. CNBV that is Mexicos market regulator will verify that the shareholders must meet this responsibility. Additionally cumulative voting is not allowed under the Mexican law, so this means that one share for one vote. However, the voting right of shareholders are based on the type of shares issued by the company, it can be no voting shares or limited voting shares. - Disclosure CNBV also issued number of regulation that covers aspects of disclosure rule. CNBV issued non-binding corporate governance practice code that is the Code for Improvement of Corporate Practices (CMP). CMP encourage companies to disclose information on all topic discuss in the meeting. However CMP isnt mandatory but the market will discriminate those who do not follow the recommendation of the CMP. CNBV also enforce compliance with the code of best corporate practices, which highlight main responsibilities of the board and encouraged companies to disclose practices and this code is mandatory. Moreover, CNBV promotes regulation regarding public disclosure of relevant events such as tender offers, repurchase of shares by issuers. So, company must disclose its shareholder structure in an annual report usually at the end of June for each year disclosure made through Mexican Stock exchanges information system (or SEDI). Company must disclose any event that can influence price of security to avoid insider-trading conduct. It is mandatory for every company to provide disclosure information since CNBV will impose penalties on issuers in case of breach of this regulation.

-Listing rule

Listing rules in Mexico also established by CNBV. The listed company must comply with the requirements, such as minimum equity, trading condition (>36 trades semi-annually), min no. of outstanding shares (>8 mil), min number or shareholder (>100) and so on. BMV, which is the countrys stock exchange that works under the supervision of CNBV must verify annually that listed companies comply with these requirements. - Accounting standards Lastly, Mexican Institute of Public Accountants (IMCP) is responsible to regulate the accounting and audit profession in Mexico. IMCP need to issue Generally accepted accounting standards (Mexican GAAP) and generally accepted auditing standards (GAAS). However, CNBV is granted regulatory supervision over the accounting, reporting and auditing requirements of listed company and is empowered to impose disciplinary penalties.

Mexico legal system is civil law Mexico is a member of OECD that is an organization that sets out principles of corporate governance. The principles set out the right of shareholders, the responsibilities of the board, the role of stakeholder and etc. This principles sets by OECD is a guidelines or recommendation for each member and it is not mandatory for the member to adopt the guidelines. In Mexico itself, there are several corporate governance institute and codes. 1. LSGM (the company Law): Establish basic company forms & shareholders right: o Registered all shares, settle transaction are executed T+2 basis, and elect the board members.

2. LMV (Securities Market Law): Regulate public company Entrusted CNBV to enforce shareholders rights.

3. What is CNBV: It is a capital market regulator and also the supervisory arm of the Ministry Finance and supervises bank and the securities market and enforces shareholder rights. Rule-making and enforcement and surveillance power

Its role in corporate governance: Issued number of regulation that covers aspects of corporate governance focusing in disclosure information. Issued non-binding corporate governance practice code, the Code for Improvement of Corporate Practices (CMP). CMP include recommendations of the organization and functioning of boards of directors as well as the protection of minority rights. It encourage to disclose information on all topic discuss in the meeting. CMP isnt mandatory but it is expected that the market will discriminate those who do not follow the recommendation of the CMP. Enforce compliance with the code of best corporate practices. Code of best practices: highlight main responsibilities of the board and encouraged companies to disclose practices. Promote regulation regarding public disclosure of relevant events (tender offers, repurchase of shares by issuers). MANDATORY o Must disclose its shareholder structure in an annual report at the end of June each year. Disclose through Mexican Stock exchanges

information system (SEDI). Disclose any event that can influence price of security to avoid insider-trading conduct. Impose penalties on issuers in case of breach of market regulations that protect shareholder rights, therefore improve investor protection in Mexico (focus: disclosure and minority shareholder rights) Establish listing rules Regulates public offerings Supervise and regulate financial institution, incl stock exchange (BMV)

4. BMV: Countrys stock exchange Impose penalties if traders fail to obtain transparent and orderly price information. Oversee shareholders rights but has limited enforcement powers so, they cant give sanction but they can give warnings.

5. Accounting standards: Mexican Institute of Public accountants: regulate the accounting and audit profession in Mexico, voluntary professional organisation. IMCP need to issue Generally accepted accounting standards (Mexican GAAP) and generally accepted auditing standards (GAAS)

Mexico is a member of OECD, it gives guidelines for corporate governance principal to its member. Bolsa Mexicana de Valores (BMV) is the country stock exchange that is under the supervision of the Comision Nacional Bancaria de Vlaores CNBV. LSGM: board of directors responsibilities and LMV Most Mexican companies is controlled by families, as generation passes, it is customary to establish a control trust where voting rules are established together with the stringent requirements for the sale of stock to outsider.