Mexican Shareholding Varieties: DIVIDENDS (SAPI)

In the Mexican entrepreneurial ecosystem, many companies—especially startups—choose to incorporate as a S.A.P.I. de C.V. (Sociedad Anónima Promotora de Inversión de Capital Variable or Investment Promotion Corporation with Variable Capital). This legal structure offers corporate flexibility, particularly in matters related to investment and profit distribution.

This article outlines the different types of dividends that can be established in a Mexican SAPI, including their characteristics, common uses, example statutory clauses (for use in shareholders' meeting minutes or incorporation documents), and hypothetical case studies to aid understanding.

DIVIDENDS: Investment Promoters

The SAPI, a Mexican legal figure designed to facilitate investment in growing companies, allows for customized issuance of dividends, making it easier to tailor economic rights per share class. This flexibility is particularly valuable for startups, angel investors, and venture capital funds.

Dividends are payments made to shareholders based on company profits. However, a key (and strategic) consideration is how to structure these dividends to satisfy both founders and investors.

Types of Mexican Dividends in a SAPI

1. Ordinary Dividends

Characteristics:

• Paid from the company’s net profits, after covering legal and statutory reserves.

• Distributed among all shareholders in proportion to the number of ordinary shares they own.

• Must be approved by the Shareholders’ Meeting.

Common Use:

• Companies that are already profitable and want to distribute earnings among founders or investors.

Sample Clause:

CLAUSE X. Distribution of Ordinary Dividends. Ordinary dividends shall be distributed among the Series “A” shareholders in proportion to their shareholding, once the legal reserve established in the General Law of Commercial Companies has been formed and any accumulated losses have been covered, if applicable. The distribution must be approved by the General Shareholders’ Meeting.

2. Preferred Dividends

Characteristics:

• Granted to preferred shares (a special class with superior economic rights).

• Have priority over ordinary dividends (paid first).

• May include a fixed percentage or amount to be paid before any other dividends.

• Can be cumulative: if not paid in one year, they accumulate for future years.

Common Use:

• Angel investors or venture funds seeking to protect their investment with a preferential return.

Sample Clause:

CLAUSE X. Distribution of Preferred Dividends. Holders of Series “B” shares shall be entitled to receive an annual preferred dividend of [percentage]% on their capital contribution, with preferential and cumulative nature, which must be paid before any distribution to Series “A” shares. If in a fiscal year there are insufficient profits, the right to the dividend shall accumulate for future fiscal years.

3. Cumulative Dividends

Characteristics:

• Generally associated with preferred shares.

• If not distributed in a given year, they accumulate until the company has the resources to pay them.

• Have priority over non-cumulative ordinary dividends.

Common Use:

• Startups. Companies that may not have profits in early years but want to secure future benefits for certain partners.

• Investor protection.

Sample Clause:

CLAUSE X. Distribution of Cumulative Dividends. If dividends are not distributed in a fiscal year, Series “B” shareholders shall retain the right to receive the corresponding dividends cumulatively in subsequent fiscal years, maintaining their preferential nature over any other share series.

4. Conditional or Performance-Based Dividends

Characteristics:

• Payment depends on meeting certain objectives, metrics, or milestones (e.g., revenue, EBITDA, market expansion).

• Distributed only if a pre-agreed profitability or event is achieved.

Common Use:

• Incentivize founders, executives, or employees with a stake in company growth.

• Align interests between founders and investors.

• Success-based bonuses for key stakeholders (employees, founders, advisors).

Sample Clause:

CLAUSE X. Conditional Dividend Distribution. Series “C” shareholders shall be entitled to an additional dividend of [X]% of the total net profits of the fiscal year, conditional upon the achievement of the following milestones: (i) the company reaching net revenues over [$X MXN], and (ii) EBITDA exceeding [Y]%. Fulfillment of these conditions shall be verified by the Board of Directors or the Audit Committee.

5. Dividends in Kind

Characteristics:

• Paid in non-cash assets, such as shares, goods, or stakes in other companies.

• Must be authorized in the company’s bylaws and approved by the Shareholders’ Meeting.

Common Use:

• Corporate restructuring or distribution of non-liquid assets.

Sample Clause:

CLAUSE X. Distribution of Dividends in Kind. The Shareholders’ Meeting may authorize the payment of dividends in kind, instead of in cash, provided equitable treatment is guaranteed for all share series in accordance with their rights. The value of the distributed assets shall be determined by an independent expert, whose assessment must be approved by a majority of voting shareholders.

The clause examples can be adapted according to the type of shareholder (founder, angel investor, fund, employees, etc.) and the purpose of the distribution (priority, incentive, future participation, etc.).

Clause for Adjusted Proportionality (Differential Participation)

The Adjusted Proportionality Clause is a legal tool mainly used in SAPIs (Investment Promotion Corporations) to modify how dividends and other economic benefits are distributed among shareholders, so they are not strictly proportional to the equity capital each holds.

This clause—statutory or contractual—allows dividend or economic rights distribution to deviate from the shareholding ratio based on specific criteria such as:

• Type or class of shares (preferred, ordinary, founders’ class, etc.)

• Achievement of performance targets (revenue, EBITDA, growth)

• Investment period or holding duration

• Vesting agreements

• Active or passive participation in the company

Legal Basis in Mexico

The General Law of Commercial Companies (Ley General de Sociedades Mercantiles "LGSM"), in its Article 112, states that the corporate bylaws may define the rights and obligations of shareholders, including preferential rights to profits. SAPIs, thanks to Article 91 Bis, have greater freedom to agree on clauses such as this.

What Is It For?

The Adjusted Proportionality Clause is useful for:

• Granting preferred dividends to certain investors (e.g., those who assumed greater risk).

• Respecting agreements between founders and investors without altering share capital.

• Avoiding future conflicts, especially when there are different classes of shares with differentiated economic rights.

• Designing incentive schemes where some partners or employees receive conditional economic benefits.

• Companies with multiple types of investors with differentiated rights.

Examples of Use in Bylaws or Agreements

Dividend Proportionality Clause

Example A:"Dividends declared by the company may be distributed in a non-proportional manner relative to share capital, in accordance with the characteristics of each share class as provided in these bylaws and/or shareholder agreements. For distribution purposes, the share class, acquisition date, achievement of goals, or agreed-upon conditions may be considered, without altering the share capital."

Example B:"Dividends may be distributed non-proportionally among different share series, as long as this is expressly stated in the corporate bylaws or shareholder agreement. In all cases, preferred and cumulative rights set forth in the respective clauses for each share series shall be respected."

Case Studies

Below are hypothetical cases and scenarios illustrating how startups and Mexican companies can design smart dividend schemes that align interests without compromising growth.

1. Cumulative Preferred Dividend for Angel Investor

Startup: EdTech Platform

Equity Structure:

• Founders: Series A shares

• Angel investor: Series B shares with preferred dividend

Strategy: The investor negotiated an 8% annual cumulative preferred dividend on their contribution. For the first three years, no distribution occurred, but the dividends were recorded in the books. In year 4, after breaking even, accumulated dividends were paid out before any profits were distributed to founders.

Outcome: The investor received a predictable return without affecting critical cash flow. Founders retained operational control and clearly agreed to reinvest profits.

2. Performance-Based Dividends for Key Employees

Startup: SaaS for logistics

Equity Structure:

• Founders: Series A

• Employees with stock options: Series C with performance-based dividends

Strategy: Employees holding Series C shares only receive dividends if the company achieves an annual EBITDA of over 20%. This aligned the team with financial goals.

Outcome: The startup avoided payouts during sensitive growth phases and created a strong sense of ownership among key employees.

3. Dividends in Kind for Founders Without Immediate Liquidity

Startup: Agricultural marketplace with strong growth but low liquidity

Situation:The company had accounting profits but needed capital for expansion. Founders preferred not to request cash dividends to preserve growth.

Solution:A dividend in kind was proposed: founders received shares in an early-stage tech subsidiary projected to significantly increase in value.

Outcome:All partners remained committed for the long term, and financial pressure to scale the business was eased.

4. Proportional Dividends Only After Reaching Revenue Milestone

Startup: Digital health application

Strategy:The bylaws stipulated that no shareholder would receive dividends until the company reached MXN $10M in annual recurring revenue (ARR). Once the goal was achieved, 30% of net annual profits would be distributed according to shareholding.

Outcome:Founders and early investors shared a clear target. This helped raise a second investment round, as the distribution rules were well-defined and performance-linked.

What Do These Cases Have in Common?

• Transparency: Distribution rules are written from the start in the bylaws and/or shareholder agreements.
  

• Flexibility: SAPIs allow for different types of shares and differentiated dividends.
  

• Strategic Focus: Dividends aren’t distributed “just because,” but based on financial goals or clear conditions.
  

• Balance: The founders’ growth vision is protected without ignoring the legitimate return expectations of investors.

Why Do Dividends Matter So Much?

For a startup, distributing dividends might seem counterintuitive—most prefer to reinvest to grow. However, dividends are not only a way to compensate investors but also a governance tool and a trust-building mechanism.

Strategy Behind Differentiated Dividends

Granting different dividends based on share series is not inherently discriminatory—it’s a strategic design that can:

✅ Attract investment without giving up controlAllow an investor to receive a guaranteed return (e.g., 10% preferred dividend) without actively participating in operational decisions.

✅ Incentivize performanceGrant dividends only if specific goals are achieved (e.g., sales, EBITDA, geographic expansion).

✅ Retain key talentAward shares with dividends to strategic employees, activated only if the company grows sustainably.

✅ Differentiate risk and rewardNot all shareholders take the same risk: someone joining early is exposed differently than someone who joins after the company is stable. Dividends can reflect that difference.

What About Equity?

This is where the ethical debate arises. Is it fair for some partners to receive more just because of the type of shares they hold? The answer depends on key factors:

1. Transparency As long as the rules are clear from the beginning (and all shareholders agree), there is no abuse or arbitrariness.
   

2. Voluntariness Mexican law respects contractual freedom: if a shareholder accepts shares without preferred dividends, they do so voluntarily.

How Differentiated Dividends Affect Equity

When differentiated dividends are implemented in a SAPI, equity (share capital or ownership percentage) doesn't necessarily change, but the way economic benefits are distributed does:

1. Equity (ownership percentage) remains unchanged

• Shareholders retain the same number and type of shares.

• The cap table is not altered by differentiated dividends alone.

2. What changes is the perceived "economic value" of the shares

• A shareholder with preferred shares may receive dividends earlier or in greater amounts—even with a smaller ownership percentage.

• A shareholder with subordinated or non-dividend shares may temporarily receive no payments—even if they own more equity.

Simple Example

Suppose a SAPI with three partners:

Partner	Shareholding %	Share Type	Annual Dividend (%)
Founder A	60%	Common (Series A)	0% (reinvested)
Investor B	30%	Preferred (Series B)	8% guaranteed
Advisor C	10%	Conditional (Series C)	5% if profits exist

In this case:

• Founder A holds most of the equity but receives no dividends while reinvestment continues.

• Investor B has less equity but receives the highest immediate economic benefit.

• Advisor C earns only if there are profits—an incentive based on results.

Dividends ≠ Voting Power

Economic rights (like dividends) may vary, but political rights (like voting in meetings) may also be equal or different, depending on the share series.

You can have equity with voice but no dividends, or with dividends but no vote—as long as it's established in the bylaws or shareholder agreement.

Differentiated dividends don’t directly change equity, but they change the economic value each shareholder derives from their equity.

This strategy helps to:

• Align incentives without diluting founders’ ownership.

• Attract investors with clear returns without surrendering control.

• Reward those who contribute economic value—not just capital.

Legal and Statutory Considerations

The SAPI's bylaws can establish different share classes, each with distinct dividend rights. It's recommended to include a mechanism for automatic adjustment in case of significant changes in the market or the company.

These clauses should be supported by a Shareholders’ Agreement detailing:

• Dispute resolution mechanisms

• Adjustments in liquidity events

• Information rights

It’s also possible to include special distribution rules in shareholder agreements.

Before distributing dividends, a SAPI must comply with the LGSM, including:

• Approval by the General Assembly

• Legal reserve of 5% annually until it reaches 20% of share capital

Recommendations for Structuring Dividends in Your SAPI

• Define the rules from the beginning. Use bylaws and shareholder agreements to avoid misunderstandings.

• Consider cash flow. Don’t compromise operations just to pay out profits.

• Use dividends as incentives. They can build loyalty, not just distribute money.

• Plan for liquidity events. Set up preferences or adjustments in case of sale or merger.

• Consider Adding an Adjusted Proportionality Clause

  • It should be clearly defined in the bylaws and/or shareholder agreement.

  • Cannot be applied retroactively without consent.

  • Requires transparency and clear accounting documentation to avoid disputes.

  • May have tax implications if the tax authority (SAT) perceives an unjustified imbalance.

• Consult a corporate lawyer to ensure alignment with the LGSM and the partners’ goals.

Conclusion

Dividends are a powerful tool when used transparently and properly regulated in the bylaws or agreements. Designing a smart dividend policy in your SAPI can be key to keeping founders motivated, investors at ease, and the team aligned.

What matters isn’t distributing quickly, but distributing wisely.

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Sources and References

1. Ley General de Sociedades Mercantiles (LGSM): https://www.diputados.gob.mx/LeyesBiblio/pdf/LGSM.pdf (Ver especialmente Art. 112 sobre derechos de los accionistas y Art. 132 sobre utilidades)

2. Secretaría de Economía – Guía de SAPIs (Sociedades Anónimas Promotoras de Inversión) Documento oficial que explica las ventajas de este tipo societario. https://www.gob.mx/se

3. Legal Paradox – “SAPIs para Startups” Blog jurídico especializado en startups y fintech. Artículos sobre estructuras accionarias y dividendos. https://legalparadox.com

4. Santamarina + Steta – “SAPIs: Flexibilidad Legal para Nuevos Negocios” Análisis legal detallado de las ventajas y herramientas disponibles en una SAPI, como dividendos diferenciados y acuerdos de accionistas. https://s-s.mx

5. Nafin/Bancomext – Guía de Financiamiento para Emprendedores Incluye secciones sobre levantamiento de capital y mecanismos de compensación para inversionistas. https://nafin.com

6. Asociación Mexicana de Capital Privado (AMEXCAP): https://www.amexcap.com

7. Fundación ProEmpleo: https://www.proempleo.org.mx