The impact of Legaltech in the Legal Sector

The impact of Legaltech in the Legal Sector

Technology in the legal sector has had a great impact in recent years, since it has rethought business models, forms of delivery and, above all, the relationship with clients, so that the profile of the current lawyer and his or her training needs to face the day to day must go hand in hand with technology. LegalTech is understood as technology that serves to better manage business models that offer legal services.

The industrialization of the legal profession is based on the generation of automatic processes, on the use of data to generate patterns and finally on the ability to be predictive. These new models are born from the innovation brought hand in hand with technology in what has been called LegalTech, which is a more profound change than digital transformation because it impacts the model and nature of providing legal services. LegalTech is a key element in the competitiveness of any model because it is directly linked to efficiency and the provision of a better service to clients.

In this industrialized legal profession, we are seeing the emergence of models that give away legal documents or offer them at a low price, that file claims in an automated way, that assist from cell phones or that advise on whether or not you should sign a confidentiality clause in seconds. Surprising? Well, we are only at the beginning of this revolution that will be marked by virtual assistants and the empowerment of buyers of legal services. Now more than ever, the client is king. And this is the focus for survival: putting the client at the center, understanding them and improving their accessibility to legal services.

We are fully entering the era of recommendation and if international legal directories such as Chambers or Legal 500 are a benchmark in this regard, we are already seeing models of lawyer recommendation based on the analysis of judgments, i.e., on statistical data of results. Searching for a lawyer is becoming easier and easier through digital search platforms, which at the same time offer two or more quotes quickly and easily. The legal sector is in full effervescence.

 Technology is impacting the sector in five areas, knowledge management, processes, service delivery, communication with clients and of course, new areas of law generating a self-consumption of models that can be standardized, an empowerment of the buyer, new forms of communication based on the digital environment, predictive capacity and lower costs.

However, the traditional legal profession will continue to have its market based on sector specialization, optimization and efficiency with the use of LegalTech in the aforementioned areas, but it will be reserved for complex and unique problems. Industrialized law is creating new users of legal services which implies a greater legal culture in society, a greater wealth and variety of models and an evolution.

Lic. Génesis Moyeda Salazar.

Gloria Ponce de León & Hernández

 

 

 

To prevent Laundering and strengthen Compliance, Certification objectives: FIU

To prevent Laundering and strengthen Compliance, Certification objectives: FIU

Money laundering is a serious problem, not only in Mexico but throughout the world. According to data from the United Nations, “money laundering reaches up to 2.7 percent of the world’s gross domestic product each year.” The weaker the State, the greater the percentage of GDP that is laundered.

Money laundering is the process through which the origin of funds generated through the exercise of some illegal activities is concealed (the most common being drug or narcotics trafficking, arms smuggling, corruption, fraud, human trafficking, prostitution, extortion, piracy, tax evasion and terrorism). The objective of the operation, which is generally carried out at various levels, is to make the funds or assets obtained through illicit activities appear as the result of legitimate activities and circulate smoothly in the financial system.

Due to the aforementioned, in the month of August, the call for the certification in prevention with resources of illicit origin was published in the Official Gazette of the Federation (DOF), aimed at individuals who carry out one of the 16 vulnerable activities , as well as those responsible for compliance of these organizations.

With the aim of contributing to the prevention of crimes with resources of illicit origin, as well as strengthening compliance with the regime of crimes related to money laundering, and compliance with the recommendations of the Financial Action Task Force (FATF) of according to what the FIU mentions.

To guide this process, the general rules of the general law for the Prevention and Identification of Operations with Resources of Illicit Origin had to be modified so that in this way the nearly 100,000 obliged subjects dedicated to one of the 16 vulnerable activities, also have to comply with the law.

Javier Estrada

Gloria Ponce de León & Hernández

M&A Landscape in Mexico today

M&A Landscape in Mexico today

The year 2019 was not characterized by important transactions of Functions and Acquisitions (M&A). This was influenced by the uncertainty within the country and beyond our borders. However, the value of transactions increased 40% to US$15,386 million, compared to 2018, a year that had a relevant drop due to the change of government. This sober recovery is still far from the results of 2015, when the total value of transactions reached $25,252 million, according to Bloomberg data.

One of the key factors affecting the state of investors is undoubtedly the U.S.-Canada trade agreement (T.MEC). Although the amending protocol was signed last December, it has yet to be approved by the Canadian Senate. There are up to 25 billion dollars waiting at the border for this ratification.

Another important aspect is the economic slowdown expected in the United States this year or in 2021. Its macroeconomic data looks good, but the market perception is that it could cool down. Now, what happens in political matters, specifically in the presidential elections, will keep the markets on edge, as well as the trade war with China. We should not underestimate the importance of what is happening in the rest of the region: Chile, one of the countries that seemed to be more stable, is now a question mark.

As for Mexico, sectors such as energy, which in 2019 had 26 transactions with a value of 4,871 million dollars, have seen investments slow down, especially in renewable energies, after regulatory changes. In others, such as pharmaceuticals, suppliers have suffered convulsive initial bidding processes. There is also a latent fear of the opening of this industry to the Chinese and Indian markets, which could have repercussions in terms of quality.

It is a fact that the Mexican and Brazilian markets are very attractive to domestic and foreign players, and it is clear that investors are looking to consolidate their participation with smaller companies or by acquiring brands from foreign players. Another aspect that plays in favor of the domestic market is the demographic base that we have very clear from now until the year 2050. In this context, the retail and consumer industry had 17 transactions with a value of US$672 million.

The financial sector is another that continues to seek profitability and will continue to focus on its core business. This industry registered 19 transactions with a value of US$3.68 billion.

Traditionally, the United States has played a predominant role in M&A transactions due to its maturity as an investor. But there are also some European countries, such as Germany, Spain and France, which are gaining some relevance. For larger Mexican investors, the U.S. market is always attractive, as are Asian markets. On the other hand, smaller companies tend to see growth opportunities in Latin American countries.

Because of Mexico’s exposure to external factors, coupled with a domestic economy that we do not yet know how it will develop. However, the foundations must be laid to continue to grow and generate investment opportunities. A much more open competition market must be created, with clear rules, in order to be more transparent and reduce corruption levels. But, above all, education levels must be increased. If this transformation is achieved, the key to success will have been found.

 

Génesis Moyeda Salazar.

Gloria Ponce de León & Hernández

Main obligations to create a SOFOM

Main obligations to create a SOFOM

The Multiple Purpose Financial Companies (SOFOM) are commercial companies whose main purpose is to grant loans with the ease of not merely depending on a bank to obtain this benefit.

The main characteristic of these companies is to be registered with the National Commission for the Protection and Defense of the Consumer of Users of Financial Services (CONDUSEF), which in turn is in charge of the Financial Service Providers Registration System (SIPRES) while these companies can be regulated or not regulated as it is establish by themselves.

 The General Law of Credit Auxiliary Organizations and Activities establishes in its article 87-B that for the registration of these companies before CONFUSEF they must meet at least the following requirements:

  1. To contemplate in its corporate purpose mainly the activities granting loans, financial leasing or financial factoring;-
  2. They may consider, in a complementary manner to their corporate purpose, the administration of credit portfolios, as well as the leasing of movable and immovable property;
  3.  Add to its corporate name the words Multiple Purpose Financial Company (SOFOM), as well as Regulated Entity (ER) or Non-Regulated Entity (ENR) as the case may be;
  4.  In the event that they are Non-Regulated Entities, they must comply with the technical opinion issued by the National Banking and Securities Commission, which has its specifications established in article 87-P of the General Law of Credit Auxiliary Organizations and Activities.

Likewise, the SOFOM ENR is obligated to report suspicious transactions that could be linked to money laundering, in addition they must keep, for a period of at least 10 years, information and documents related to the identification of their users/customers. When obtaining a new client/user, the SOFOM must clearly and unambiguously inform everything that involves the contract they enter into, such as the amount, payment, interest, etc., which must be covered by the user.

An essential part of knowing these and other obligations lies in the need to have specialists in this service.

Antonio Quiroga

Gloria Ponce de León & Hernández

 

 

Foreign Investment in Mexico: a Representative Office, Branch or Subsidiary with Foreign Capital

Foreign Investment in Mexico: a Representative Office, Branch or Subsidiary with Foreign Capital

Mexico is currently ranked as the ninth country in the world that received the largest amount of foreign investment during 2020, which represented an improvement over the fourteenth place it had in 2019, the above was revealed in a report by the United Nations Conference on Trade and Development (UNCTAD).

Taking into consideration the above, it is important to know what is a representative office in Mexico, a branch and a subsidiary with foreign capital.

Let’s start with Representative Offices, which are understood as those establishments installed in foreign locations either inside or outside a country, for communication purposes, marketing studies or representation of the parent company.

The main objective of representative offices is to conduct direct research in a target market in order to establish service and product offerings to potentially new consumers. Many companies use it as a strategy to later make larger investments when starting a national or international expansion process, they can even create strategic alliances with local firms and finally it aims at a detailed analysis of competing companies.

Finally, the establishment of a representative office without income, fiscally speaking, is convenient for a foreign company that does not wish to carry out acts of commerce, but exclusively activities of client acquisition, or as a point of contact between the foreign company and Mexican clients. This, however, is not a way to make an investment, since it does not imply the authorization of foreign capital, nor can it carry out activities in Mexico to produce profits. Nor is it necessary to register them in the National Registry of Foreign Investments.

Branches are defined as a type of quasi-corporation, wholly owned by its direct investor, i.e., it is not incorporated, but operates separately from its owners. It is a foreign legal entity that decides to have a physical presence in a country other than its own, because its economic activity, production of goods and services or commercialization, so warrants, but decides to do so without the participation of a Mexican company.

Starting operations in Mexico implies the entry of foreign capital in order to establish offices, industrial or commercial premises for the acquisition of machinery and equipment, as well as the hiring of local personnel.

Articles 3, 14 and 15 of the Commercial Code recognize foreign corporations, specifically Article 15 states:

“Companies legally constituted abroad that are established in the republic, or have in it any agency or branch may exercise acts of commerce…”

The registration of the foreign company under this modality will not have a new legal personality but will maintain the one it has abroad to carry out its mercantile operations.

Finally, both the branch and the representative office require the approval of the General Directorate of Foreign Investment to be established in the national territory.

In the case of subsidiaries with foreign capital, unlike corporations or limited liability companies (the most common types of companies in Mexico), they will have a legal personality different from that of the partners.

Clarifying the following points: they may only participate in economic activities that are not reserved or subject to maximum foreign investment limits, according to the applicable Law.

It is also not advisable to incorporate them as Simplified Joint Stock Companies since their income should not exceed 5 million pesos.

Now, according to the Foreign Investment Law, a foreign company must have the authorization of the Ministry of Economy to operate in Mexico, without prejudice to the compliance of other obligations established in provisions other than the Foreign Investment Law, which, as already mentioned, may be the Commercial Code, the Federal and/or local Civil Code of the Entity in which they are established, among others.

Finally, it is necessary to know that a company cannot have an authorization to exercise commercial acts and to have a representative office, that is to say, one excludes the other, when a company has a branch office authorization, it is because such company performs commercial acts. Only when it stops performing commercial acts and only represents the interests of such company in Mexico, it may request a new authorization to establish itself as a representative office.

Conversely, when a company has a representative office authorization, such company will not be able to perform commercial acts; therefore, if it intends to habitually engage in commerce, it must have the authorization to register its bylaws in the Public Registry of Commerce.

It is also important to know that on August 8, 2012, the General Resolution issued by the National Foreign Investment Commission was published in the Official Gazette of the Federation (“DOF”), which establishes the criteria for the application of Article 17 of the Foreign Investment Law, regarding the requirements for foreign legal entities to habitually carry out acts of commerce in Mexico or for the establishment of foreign legal entities in Mexico. By virtue of such Resolution, foreign legal entities incorporated under the laws of the United States of America, Canada, Chile, Costa Rica, Colombia, Nicaragua, El Salvador, Guatemala, Honduras, Uruguay, Japan and Peru that intend to habitually carry out commercial activities in Mexico are no longer required to obtain prior authorization from the Ministry of Economy to habitually carry out commercial activities in Mexico (open a branch) or to establish themselves in Mexico (representative office), such requirement being satisfied with the presentation of a written document.

If you wish to invest in Mexico and you have doubts about what is convenient for you or not, we have a team of experts at your disposal that will be able to advise you on all the steps and requirements for your incorporation or establishment in Mexico. Come to us.

Carolina Áviles

Gloria Ponce de León & Hernández

 

 

 

 

 

 

Main strategy options for gas stations in relation to the Energy Reform

Main strategy options for gas stations in relation to the Energy Reform

One of the main objectives of the Energy Reform is to promote the market and increase competition, and consequently, the governed have a greater range of options to choose where to use the services of the gas stations.

Now, for gasoline operators, they also open the doors so that they have more options to obtain gasoline, as well as rent, or store in another way than usual, before the Energy Reform.

Here we list some options for gas stations:

  1. Rent the business or sublet it
  2. Allying with competitors, or with other providers
  3. -ncrease the value offer, give a plus to the service they offer;
  4. Acquire competitors;
  5. Strategy for gas stations entering new segments of the value chain
  6. Enter the oil transportation business, storage, as long as you have this permission from the competent authority
  7. Strategy for gas stations transforming the current business
  8. Brand differentiation, since a private brand can be assigned, which also has an intrinsic value
  9. Total independence and brand differentiation;

Among other.

In the same vein, on May 4, 2021, the Reform to articles 51, 53, 56, 57, 59 Bis and 86 of the Hydrocarbons Law was published in the Official Gazette of the Federation, by which they restrict the permits for the Transportation, Storage, Distribution, compression, liquefaction, decompression, regasification, commercialization and Sale to the Public of Hydrocarbons, among others, which could cause for permit holders.

Which can generate uncertainty for gasoline or permit holders speaks of a possible temporary occupation, intervention or suspension of the permit, with the purpose of “guaranteeing the interests of the Nation” without being able to identify this concept, leaving it to the discretion of the authority that concept. In addition, that in its article 59 Bis, it grants the Energy Regulatory Commission and the Secretary of Energy to suspend the permits issued when “an imminent situation is foreseen for national security, energy security or the national economy”, it still creates legal uncertainty and can leave at the discretion of the authority the cases of revocation of the permit

Arturo de la Peña

Gloria Ponce de León & Hernández