Doing Business 2020
Mexico
Protecting Minority Investors
This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights,
governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed
in May 2019. See the methodology for more information .
What the indicators measure
• Extent of disclosure index (0–10) : Disclosure, review, and
approval requirements for related-party transactions
Case study assumptions
To make the data comparable across economies, a case study uses several assumptions about
the business and the transaction.
• Extent of director liability index (0–10) : Ability of minority
shareholders to sue and hold interested directors liable for
prejudicial related-party transactions; Available legal
remedies (damages, disgorgement of profits, disqualification
from managerial position(s) for one year or more, rescission of
the transaction)
• Ease of shareholder suits index (0–10) : Access to internal
corporate documents; Evidence obtainable during trial and
allocation of legal expenses
• Extent of conflict of interest regulation index (0-30): Sum of
the extent of disclosure, extent of director liability and ease of
shareholder suits indices
• Extent of shareholder rights index (0-6) : Shareholders’ rights
and role in major corporate decisions
• Extent of ownership and control index (0-7) : Governance
safeguards protecting shareholders from undue board control
and entrenchment
• Extent of corporate transparency index (0-7) : Corporate
transparency on ownership stakes, compensation, audits and
financial prospects
• Extent of shareholder governance index (0–20) : Sum of the
extent of shareholders rights, extent of ownership and control
and extent of corporate transparency indices
The business (Buyer):
- Is a publicly traded corporation listed on the economy’s most important stock exchange.
- Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of
Buyer where permitted, even if this is not specifically required by law.
- Has a supervisory board in economies with a two-tier board system on which Mr. James
appointed 60% of the shareholder-elected members.
- Has not adopted bylaws or articles of association that go beyond the minimum requirements.
Does not follow codes, principles, recommendations or guidelines that are not mandatory.
- Is a manufacturing company with its own distribution network.
The transaction involves the following details:
- Mr. James owns 60% of Buyer, sits on Buyer’s board of directors and elected two directors to
Buyer’s five-member board.
- Mr. James also owns 90% of Seller, a company that operates a chain of retail hardware stores.
Seller recently closed a large number of its stores.
- Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Buyer’s
distribution of its food products, a proposal to which Buyer agrees. The price is equal to 10% of
Buyer’s assets and is higher than the market value.
- The proposed transaction is part of the company’s principal activity and is not outside the
authority of the company.
- Buyer enters into the transaction. All required approvals are obtained, and all required disclosures
made—that is, the transaction was not entered into fraudulently.
- The transaction causes damages to Buyer. Shareholders sue Mr. James and the executives and
directors that approved the transaction.
• Strength of minority investor protection index (0–50) : Sum
of the extent of conflict of interest regulation and extent of
shareholder governance indices
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