Mexico: CNH Update - New Rules For Assignment Of Corporate Control & Operative Control

Last Updated: 7 June 2016
Article by MCM Abogados

CNH held yesterday its 19th extraordinary session of Y2016, whereby it was approved, among other matters, the Guidelines establishing the requirements and procedure for alliances and associations in connection with contracts for the exploration and extraction of hydrocarbons (Lineamientos por los que se establecen los requisitos y el procedimiento para celebrar alianzas o asociaciones respecto de los contratos para la exploración y extracción de hidrocarburos) (the "Guidelines"), the report as follows:

In terms of the Hydrocarbons Law (the "LH"), the assignments of the corporate and/or operative control in Contracts for the Exploration and/or Extraction of Hydrocarbons (the "E&E Contracts") shall be approved by CNH; the purpose of the Guidelines is to establish the requirements and the procedure through which CNH will resolve the requests for the authorization of assignments submitted by Contractors. The following are some of the requirements that shall be complied with in such requests of consent:

  1. Documentation evidencing that the potential assignee has the necessary technical, performance and experience capabilities (solely in case of assigning operations);
  2. Documents evidencing the financial capabilities of the potential assignee and origin of the financial resources;
  3. Statement under oath in which it is stated that in case that the assignment is authorized, the same will not affect the necessary capabilities for the Contractor to continue conducting the petroleum activities;
  4. The potential assignee shall assume jointly and severally, without any conditions, the totality of the liabilities inherent to the E&E Contract; and
  5. The transition plan for the management system proposed by the potential assignee and the documentation evidencing the experience to operate such system (solely in case of assigning operations).

In order to carry out the evaluation for the acceptance of the assignment request, CNH will verify that the potential assignee evidences the requirements mentioned above, in the light of the \prequalification requirements\ established in the Bidding Guidelines that governed the bidding procedure in which the relevant E&E Contract was awarded.

In case the E&E Contract did not derive from a bid, but from the migration of a Pemex´s Entitlement, CNH may use the bidding guidelines of an analog project (i.e. onshore/offshore; production sharing/license modality etc.). If an analog project does not exist, CNH in coordination with the Ministry of Energy (Secretaría de Energía) ("SENER"), will determine which will be the applicable prequalification requirements.

If the potential assignee has a \prequalification certificateissued by CNH of the corresponding bidding procedure, it will not require to submit the documentation to evidence the capabilities, provided that it submit an statement under oath that the evaluated capabilities have not suffered any detriment.

Once the assignment consent request is submitted, CNH will inform SENER, so that the latter gives observations and, subsequently, CNH will issue the relevant resolution (CNH may request the Contractor to clarify certain information or submit additional information in case of missing requirements in the application); 30 days after the assignment is authorized, the assignee and the assignor shall execute the relevant assignment agreement and afterwards, an amendment agreement to the corresponding E&E Contracts will be executed.

CNH will not authorize the assignment in the following cases:

  1. Those scenarios established in Article 26 of the LH: (a) companies blacklisted to participate in contracting procedures by the competent authority; (b) those with serious infringements with CNH; (c) those that have submitted false or incomplete information to CNH; (d) companies using third parties to evade the foregoing, etc.
  2. Winning Bidders that did not execute a E&E Contract that was awarded to them by CNH, will be banned to be assignees of the Bidders in Second Place to which the E&E Contract was awarded at the end.

Note that for the elaboration of the Guidelines, an advisory council was formed in which the Mexican Association of Hydrocarbons Companies (AMEXHI), SENER, the National Agency of Industrial Safety and Environmental Protection in the Hydrocarbons Sector (Agencia Nacional para la Seguridad Industrial y de Protección al Medio Ambiente del Sector de Hidrocarburos) (ASEA) and CNH participated.

CNH approved that the Guidelines be published in the Federal Commission of Regulatory Improvement (Comisión Federal de Mejora Regulatoria) (the "COFEMER") so that, once the corresponding regulatory improvement procedure at COFEMER is completed, the Guidelines will be published in the Federal Register (Diario Oficial de la Federación).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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