Every day, thousands of multinational companies rely on powers of attorney to conduct the day-to-day administration of their Mexican businesses. A company’s ability to initiate and defend itself in litigation, pay taxes or issue checks are but some of the functions Mexican proxies (or poderes) facilitate. However, the failure to scrutinize powers granted and to monitor proxy-holders themselves may leave a company susceptible to abuse.
American, and particularly Texas-based, in-house counsel increasingly are tasked with the issuance, administration and revocation of international powers of attorney. As such, these in-house lawyers must understand the strengths and limitations of these crucial proxies.
Akin to its Texas equivalent, a Mexican power of attorney allows for the representation of an individual or organization unable or unavailable to represent itself. However, this is where the similarities end. Unlike in Texas, where an individual may have actual, implied or apparent authority to act on behalf of a company, Mexican law requires a formal granting of agency to undertake most judicial acts.
Without the existence of apparent authority, Mexican companies are forced to utilize powers of attorney licensing individuals to act in their stead. As such, Mexican powers of attorney are employed much more frequently and touch the commercial operations of almost every aspect of a Mexican company’s business.
A Mexican entity’s commercial transactions — whether simple, such as paying bills or acquiring goods or assets, or complex, such as opening and maintaining bank accounts, representing an entity at meetings or representing a company before judicial bodies — all require the existence of a valid power of attorney. Companies and individuals not wanting to be saddled with executing every underlying deal document (as required under Mexican law) or with signing each pleading in a suit often delegate these tasks to a designated proxy-holder.
In Texas, a valid power of attorney simply requires the grantor to execute the proxy in front of a notary. Although Texas proxies may be recorded, such recording is permissive. By contrast, the issuance of a power of attorney in Mexico is a much more formal process. Mexican proxies must be signed by a grantor and, in certain situations as prescribed under the Mexican Civil Code, require attestation by two witnesses. A Mexican notary public typically must oversee the execution of the power of attorney.
Unlike their Texas equivalent, Mexican notary public powers are expansive and extend well into the realm of legal review and counsel. Whereas Texas notaries’ authority mirrors that of a county clerk, Mexican notaries are considered aides to the administration of justice. As such, Article 42 of the Notary Law for the Federal District of Mexico entrusts them with “interpreting, redacting and giving legal shape” to the intentions of individuals requesting their assistance.
After verifying that the requisite procedural requirements are met, a Mexican notary public then registers the proxy as a public deed. Texas in-house counsel must be mindful that certain Mexican powers of attorney must be recorded in specific public registries. For example, proxies for commercial papers must be recorded in the Public Registry of Property and Commerce (the Registro Público de la Propiedad y del Comercio).
In Texas, the scope of a power of attorney is restricted by its context. Texas courts strictly scrutinize the interpretation of any power conferred upon an agent and exclude the exercise of unwarranted powers.
Unlike its Texas counterpart, a power of attorney in Mexico may be of either specific or general application. Article 2554 of the Mexican Federal Civil Code identifies three types of proxy: the power over disputes and collections (or pleitos y cobranzas) to act as legal representative and to collect money on behalf of its grantor; the power to conduct administrative acts (or actos de administración) on behalf of the grantor; and the power to perform acts of control (or actos de dominio) over the proxy-holder’s legally owned property, including the sale or transfer of land, capital and/or stock.
Limit the Scope
Texas in-house counsel should attempt to tailor the scope of Mexican powers of attorney to limit their authority. A proxy can bestow all three of the aforementioned powers or may be limited to any one or any combination of powers. Examples of restricting a power of attorney’s scope include confining it to a certain type of transaction; avoiding overbroad designations of power, including end dates for a proxy’s validity; and requiring periodic reissuance.
All too often, Texas companies effectuating hundreds of transactions in Mexico requiring proxies grant such powers imprudently, without oversight or limitations. Critically, Mexican powers of attorney may not expire automatically. For example, mere termination of an employee may not, by itself, extinguish a previously granted power of attorney. Consequently, a fired proxy-holder with an unrevoked general power of attorney may continue to posses the capacity to enter into contracts on a company’s behalf (such as executing leases) or to act as its legal representative indefinitely (such as by improperly accepting service of process or filing and answering suits on behalf of the company).
Under Article 2596 of Mexican Federal Civil Code, a grantor may annul a power of attorney at any time and by whatever means the grantor sees fit. Notwithstanding the code’s seemingly broad language, defensible revocation of a Mexican proxy requires personal notification by a certified Mexican notary public.
Unfortunately, no mechanism exists by which a general revocation of all existing and outstanding powers of attorney may occur. This is especially critical in the context of Mexican litigation. Notification of a recently filed suit to any of a company’s general proxy-holders constitutes proper service of process on that company, commencing the litigation time table and, consequently, the answer date for a potentially unsuspecting legal department.
Texas in-house counsel must appreciate the stark differences in the breadth, scope and function of domestic powers of attorney versus those of their Mexican counterparts. In-house attorneys overseeing Mexican operations should track closely all those who hold powers of attorney — inside and outside their organizations — and understand the specific types of powers granted to each. The regulation and oversight of existing and future powers of attorney represent a critical risk management tool for Mexican operations.