Report and Recommendations of the Ad-Hoc Committee

on the Relationship Between

The International Friends of Puerto Escondido and

  Amigos Internacionales de Puerto Escondido, A.C.

June 8, 2007

In May 2007, an Ad-Hoc Committee was formed to examine the relationship between The International Friends of Puerto Escondido and Amigos Internacionales de Puerto Escondido, A.C. and to make recommendations to the Membership of these entities regarding their future association.  This Committee was comprised of Sheila Clarke, Vicki Cole, Minne Dahlberg, Mike Gerstenberger, Chela Hernandez, Susie Hirschfield, Julie Leggatt, Al Steinberg, Sunny Summers and Kate Welch.

Note:  To minimize confusion (eliminating it is impossible!), in this document, “IFOPE” will mean the group that meets monthly at the Hotel Villa Mexicana and “AC” will mean Amigos Internacionales de Puerto Escondido, A.C.

Background

IFOPE was organized in May 1998 as an unincorporated group of foreigners and other interested parties in Puerto Escondido with common interests.

In the Summer of 2001, IFOPE authorized creation of a new not-for-profit corporation, the AC.  The motivation for so doing was three-fold:  1) As an unincorporated group, IFOPE could not open a banking account in its own name; 2) An Asociaciòn Civil may apply to the Mexican taxing authorities for permission to issue receipts which allow a donor to take deductions from their Mexican taxes.  It was felt that such standing would encourage Mexican businesses and individuals to provide financial support to further the purposes of IFOPE; and 3) for legal recognition.

 IFOPE did not dissolve itself at the time it created this new corporation.

It is here that perceptions begin to diverge.  Some Members have the understanding that IFOPE is simply the operating arm of the AC and that there exists only one entity, the AC.  Others point out that since there are two sets of Bylaws, two  Boards of Directors,  two different sets of Members (In its Charter, the AC has only ten Members; Members of IFOPE are not automatically Members of the AC), two sets of Objectives (similar but not identical) and two different sets of Meetings, there actually are now two distinct entities. No documentation exists to resolve these different interpretations.

As a practical matter, in November 2003, the IFOPE membership directed that its monies should be turned over to the AC Treasurer to be “maintained” in the banking account of the AC. “Maintained” was not defined in the action taken by IFOPE:  Thus the elected IFOPE Treasurer may not write checks nor access monies without coordination with the AC Treasurer.  This creates some operational difficulties.  

Additionally, the AC has not been successful, to date, in achieving the necessary designation to offer tax-deductible receipts to donors.

The relative authority and prerogatives of the respective Boards of Directors are not clear.

Over the last year, one of the AC Officers has died and two other Officers have moved out of town.  The current President of the AC has submitted her resignation.  Thus, this  Ad-Hoc Committee was formed to clarify the relationship between IFOPE and the AC, to determine  the relevant Mexican law  and to make recommendations to the respective Memberships on future steps.

Process

The Ad-Hoc Committee has met twice (not all Committee Members were able to attend both meetings).  Additionally, three Sub-Committees have also met to perform fact finding.

At its initial meeting, the Committee agreed that professional legal and accounting guidance was needed.  Since some questions had also arisen regarding Immigration Law, counsel was also sought from the local Sub-Delegado of the Mexican Immigration Service.

The group developed three sets of questions: one for an attorney, one for an accountant and one set for immigration officials.  These questions were prepared in Spanish and submitted to the respective professional prior to a meeting with Sub-Committee Members.  In each case, there were at least three Ad-Hoc Committee members present at each professional meeting.  One group met with Lic. Julio Ramirez, a local attorney.  A second group met with an accountant, Lic. Basilio Mendoza Bohorquez, and a third group met with Lic. Marcos Cortes Corpus, the Sub-Delegado of the Instituto Nacional de Migraciòn.

Notes from those meetings and/or written responses are attached.

Principle Findings

The notes and written responses speak for themselves and will not be repeated here, but the Ad-Hoc Committee recognized several of them as particularly significant to the current discussion.

• Clarity in the organizational structure is needed;
• Although unincorporated groups may exist in Mèxico, they may not legally conduct the type of business in which  IFOPE/AC is currently engaged;
• An Asociaciòn Civil structure offers compelling liability and tax advantages to the entity and to the Members of the entity;
• The appropriate Mexican entity for a charitable not-for-profit group is an Asociaciòn Civil;
• Foreigners may participate as members of an Asociaciòn Civil, but to serve as Officers or Committee Chairpersons, they must have FM3 or FM2 visas with a specific authorization.  There is a fee for this authorization.
• There will be some on-going operational costs to operate as an AC.  These include approximately $2500 pesos per year in notary fees.  Accounting services are currently provided at no charge, although this may change in the future. Additional immigration fees vary with the type of visa, but may run from $1800 pesos to $2500 pesos per Officer per year. Fines for non-compliance with immigration requirements would be extra.

Recommendations

Therefore, the Ad-Hoc Committee urges the respective Memberships to adopt the following recommendations:

1)         IFOPE and the AC should formally merge, creating one entity with a single new             Constitution and Bylaws, one set of Officers and an integrated Membership;

2)         This merged organization should operate as an Asociaciòn Civil.  Since IFOPE has already paid to create International Friends of Puerto Escondido, A.C. and it   carries some name recognition in the community, it is recommended that the merged organization continue as a newly constituted Amigos Internacionales de Puerto Escondido, A.C.;

3)         It is recommended that the new A.C. have at least six Officers:  a President,      Secretary and Treasurer and three Members of an Oversight Committee (Consejo de Vigilancia).  Some candidates have been identified, more are needed;

4)         Streamlined procedures for incorporating IFOPE Members into the AC must be

            established; and

5)         Since changes in the Officers and Constitution of the AC must be formally recorded at the Notario Publico, the IFOPE Membership is requested to approve funding not to exceed $5000 pesos now to accomplish this.

 We suggest that these recommendations be discussed and considered and that action be taken by both IFOPE and the AC before the end of July 2007.

Respectfully submitted,

Attachments:

Responses (in Spanish) from Lic. Julio Ramìrez

(Note: Translation is for convenience only.)

1.  What legal entity exists for charitable organizations under Mexican law?

La ley en México establece las “Asociaciones Civiles” (A.C.), como organizaciones que se dedican a actividades no lucrativas, es decir, a actividades que no persiguen ganar dinero para sus miembros o asociados, sino beneficiar a otras personas o asociaciones.

Ra la actividad que desarrollan los Amigos Internaciones de Puerto Escondido, la mejor decisión es establecerse como una A.C.

The law in México establishes  the “Civil Associations” (A.C.) as organizations that are dedicated to not-for-profit activities, that is to say, that do not intend to make money for its members or associates, but rather to benefit other persons or associations.

Regarding the activity that the International Friends of Puerto Escondido has developed, the best decision is to be established as an A.C.

2. What are the advantages of being registered as this particular legal entity?

Primero: Que tiene personalidad jurídica propia, es dicer que es reconocida la organización regular y diferente de todos sus integrantes ante todas las personas, empresas y órganos de gobierno municipal, estatal y federal;

Segundo: Que aún con la salida de algunos miembros, la Asociación sigue existiendo con los miembros que sigan y con los nuevos que se integren.

Ademàs de una serie de beneficios que se pueden conseguir y tramitar ante otras organizaciones, igualmente constituidas u órganos de gobierno.

First, that is has its own legal character, that is to say, the organization is recognized as regular and different from all its members before all persons, businesses and organs of the Federal, State and Municipal government.

Second, even with the exit of some of its members, the Association continues with the members that follow and with the new ones that are admitted.

Moreover, there are a series of benefits that can be obtained and exercised before other similarly constituted organizations or organs of the government.

3. What are the disadvantages?

No creo tenga desventajas, pero si algunas responsabilidades administrativas que debe de llevar con apego a las leyes Mexicanas, como por ejemplo la contabilidad, facturas, el libro de actas, etc.

I do not believe there are disadvantages, but there are some administrative responsibilities that must be observed under Mexican law, for example, accounting, invoices, a book of minutes, etc.

4.  Is being registered as a legal entity mandatory for a charitable organization?

Siempre que se reúna un grupo de personas para realizar una actividad o con un objeto común, es necesario que se constituyan pero tener una personalidad jurídica que les de credibilidad y la seriedad como organización.

Pueden reunirse como un grupo de personas, siendo una organización irregular, pero siempre habría un descontrol de socios y quien los representa, encontrándose con la limitación de que siempre les solicitar su acta constitutiva para poder ser legalmente reconocida su organización.

To meet as a group of persons to carry out an activity or with a common objective, it is necessary to be constituted as a legal entity to be considered a credible and serious organization.

It is possible to gather as a group of people, being an irregular organization, but there always could be a lack of control of members and who represents them, limited always to its constitutional acts to be able to be legally recognized as an organization.

5. What are the Federal and/or State Codes/Laws/Regulations that govern this legal entity?

En forma directa tenemos a la Constitución Política de los Estado Unidos Mexicanos y al Còdigo Civil para el Estado de Oaxaca, y sus similares los demás Estados.

Y en forma complementaria, entre otras también tenemos el Código Fiscal y la Ley de Sociedades Mercantiles.

In direct form, there are the Political Constitution of the United Mexican States and the Civil Code of the State of Oaxaca and parallel Codes of the other States.

In a complimentary form, among others there are the Fiscal Code and the Law of Commercial Societies.

6. Who makes up the Governing Board of this entity?

En el caso de las A.C. es formado por:

Una Mesa Directiva o Comité Directivo (puedo llamarse de con otro nombre, que se integra por un Presidente, un Secretario y un Tesorero (un Vicepresidente opcional, esta Mesa Directiva administra y representa a la asociación.

Además de un Consejo de Vigilancia, que se conforma con un Presidente, uno o dos Vocales (según decida la Asamblea quien siempre será el órgano máximo de la Asociación) este Consejo de Vigilancia el buen funcionamiento del la Mesa Directiva o Consejo de Administración; y

También puede formarse un Consejo de Honor y Justicia que se puede integrar por un Presidente, un Secretario y un Vocal, que resolverá las controversias internas que exista en la Asociación.

In the case of the A.C., it is formed by:

A Board of Directors or Directors Committee (you may use another name), that is made up of a President, a Secretary and a Treasurer (a Vice President is optional), this Board of Directors administers and represents the Association.

Moreover, an Oversight Committee, that is composed of a President, one or two Directors (following that determined by the Assembly, which is always the ultimate authority of the Association). This Oversight Committee monitors the proper functioning of the Board of Directors or the Administrative Counsel.

In addition,  a Counsel of Honor and Justice may be created that consists of a President, a Secretary and a Director, that resolves the internal controversies that exist within the Association.

7.  Is there a legally dictated minimum number who have to be on the following boards? Who?  - Consejo de Vigilancia,  - Comite de Honor u Justicia,  -Board of Directors

No hay un número determinado, pero se recomienda que sean de por los menos 3 integrantes para que en caso de empate, en la toma de decisiones, el Presidente tenga voto de calidad.

There is no required number, but it is recommended that there be at least 3 constituents so that in the case of a tie, in making decisions, the President may vote to break the tie.

8. What are the legal liabilities of the Officers?  Members?  Project Committees?

Los derechos y obligaciones de los Asociados siempre serán establecidos por la Asamblea y también establecerán las obligaciones y derechos de las Comisiones, Mesas Directivas, Consejos de Vigilancia y del Consejo de Honor y Justicia, en caso de que no cumplan con sus obligaciones.

The rights and obligations of the Associates will always be established by the Assembly who also determines the obligations and rights of the Commissions, Boards of Directors, Oversight Committee and the Counsel of Honor and Justice, in the event that there is non-compliance with their obligations.

9. With respect to adding new Members, how is this done?

El ingreso de nuevos miembros se hace en Asamblea de Asociados y como lo establecen los Estatutos Sociales de la Asociación.

The admission of new Members is done in an Assembly of Associates and as established in the Social Statutes f the Association.

10.  How do we drop Members from our organization who may move or are not current with their membership dues?

En la actualidad solo son miembros de la Asociación los que están el Acta Constitutiva, para integrar y excluir a algún miembro, si tiene que celebrar una Asamblea de los Miembros actuales.

Currently only those are Members of the Association that have been (listed) in a Constitutional Act. To add or delete some members, there must be a Assembly meeting of current Members.

11. What happens to the A.C. if there are no Members who want to serve on the Board?

Se puede contratar a una persona para que trabaje para la Asociación pero a esta persona se le debe de pedir una fianza o garantía para que garantice su función, o que se haga responsable alguno de los miembros de la Asociación por el trabajo que desempeñe a quien contraten.

You may employ a person to work for the Association but this person should be bonded or present a guaranty to assure their performance, or be responsible to some of the Members of the Association to accomplish the work for which they were engaged.

12. What could be (the) legal consequences for Board Members not complying with

the Constitution of the A.C.?

Las consecuencias legales se establecen en los estatutos sociales, y en caso de que no hayan establecido, se puede hacer una adición que indique como se debe de actuar y quien debe de hacer las denuncias o demandas legales.

The legal consequences are established in the Social Statutes, and in the event that they have not been established, an addition may be made to indicate what should be done and who should make the accusations or legal suits.

13.  How can we allow for provisional or non-voting Members?

No response.

14. How do we remove Board Members?

No response.

15. What are the permitted activities of an Associaciòn Civil?  Own Property? Raise Funds? Maintain Banking Accounts?

Una Asociación Civil depende de sus objeto social, es decir, depende de cual sea su objetivo, y partiendo de ahí, puede realizar las actividades necesarias para cumplir con el objeto o meta planteada, pudiendo recibir donativos, hacer donativos, comprar inmuebles, ya sea para sus oficinas o para prestar servicios de su misma actividad o para donarlos; y por su puesto que lo más sano es que se tenga una cuenta de banco para el claro manejo de sus recursos. Éste cuenta debe ser a nombre de la Asociación y se sugiere que sea manejada por el Tesorero en conjunto con el Presidente o Secretario.

A Civil Association, depending on its social objectives, that is to say, depending on those objectives and what is derived from them, may conduct those activities necessary to realize those objectives and established goals. It may receive donations, make donations, purchase property, and have offices or lend services of similar activities for donors; and of course, if it is more convenient, it may have a banking account for the proper management of its funds.  This account must be in the name of the Association and it is suggested that it be maintained by the Treasurer, in collaboration with the President or Secretary.

16.  Can we modify, change and delete from the basic Constitution of the A.C.?  How?

Si pueden, pero debe de hacerse en Asamblea de Asociados, y de acuerdo al Objeto Social.

You may, but it must be done in the Assembly of Associates and must be consistent with the Social Objectives.

17.  What is the minimum legal documentation (constitution, financial reports, minutes of meetings, etc) required to support an A.C.?

Se les recomienda que hagen sus Actas de Asambleas Ordinarias Anuales y que tengan un libro de Actas para cada reunión mensual y extraordinaria que tengan, ademàs que tengan todos los documentos de la contabilidad para estar al corriente con Hacienda.

It is recommended that there be Minutes of the Ordinary Annual  Assembly and that  a book of minutes be maintained for each monthly meeting and for extraordinary meetings, moreover there should be all of the current accounting documentation for the Revenue Service.

18. Can we include the internal bylaws into the A.C: Constitution of should they be kept separate?

Pueden tener un Reglamento Interno que este de acuerdo a sus Estatutos Sociales y que regule cosas especificas que los Asociados quieran regular (debe ser aprobado por la Asamblea de Asociados).

You may have internal regulations that are consistent with the Social Statutes and that regulate specific things that the Associates wish to control (these regulations must be approved by the Assembly of Associates).

19. Where does the physical address of a Civil Association need to be?

Es caso de no tener una oficina especifica de la Asociación, se recomienda que los Asociados establezcan una oficina en casa de algún Asociado, que tenga un espacio, para las posibles vistas de las autoridades Hacendarías o cualquier otra.

In the event there is no specific office of the Association, it is recommended that the Associates establish an office in the home of some Associate that has the space, for the possibility of visits from the Revenue Service or other authorities.

20. What is the (notarial) cost for a yearly General Assembly Meeting?

Depende el contenido de la Asamblea y los puntos que se traten en la misma, podemos dar un costa desde $2,500 incrementándose segùn sea la Asamblea.

Quedo a sus órdenes para cualquier aclaración y comentario en los teléfonos de costumbre o por este mismo medio.

Depending on the content f the Assembly and the topics covered, we can give a cost of approximately $2,500 increasing depending on the Assembly.

I am available for any clarification and comment via telephone or internet.

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