Applicable Provisions For Simplified Issuers And Securities Subject To Simplified Registration

On January 21, 2025, the decree issuing the general provisions applicable to simplified issuers and securities subject to simplified registration (Disposiciones aplicables a las emisoras simplificadas y los valores objeto de inscripción simplificada) (the "Provisions") was published in the Official Gazette of the Federation (the "DOF"). The purpose is to democratize access to financing offered by the securities market to companies, especially small and medium-sized enterprises, through the incorporation of the simplified securities registration procedure and to regulate the characteristics that commercial companies must meet to request, obtain, and maintain the registration of their securities in the National Securities Registry (the "Registry") through the mentioned procedure, as well as their obligations regarding transparency and disclosure of information to the investing public; and to regulate the participation of brokerage firms and stock exchanges in the Simplified Registration (the "Decree").

The most relevant aspects of the Decree are as follows:

1. Simplified Issuers: Mexican and foreign companies with a minimum of two years of operation and generating income as a result of their core business activity, understood as that inherent to the sector or industry to which they belong, at the time of obtaining their registration, may qualify as Simplified Issuers. The seniority requirement mentioned will also be required for the trustor contributing the assets intended to guarantee the payment of the issuance of the Securities backed by such assets, even if the issuing trust is newly created.
2. Securities Subject to Simplified Registration: Simplified Issuers may request simplified registration in the Registry of shares, ordinary participation certificates representing them, or equity representative securities of foreign companies, debt instruments, asset-backed securities, and structured securities. The securities subject to simplified registration may only be offered to institutional and qualified investors.
   
   In accordance with the second transitory provision of the Decree, structured securities will come into effect on the business day following the publication in the DOF of the specific requirements and characteristics for such securities, which must be published within a period not exceeding 180 calendar days from the publication in the DOF of the amendments to the general provisions applicable to securities issuers and other market participants (Disposiciones de carácter general aplicables a las emisoras de valores y a otros participantes del mercado de valores) ("CUE"), regarding development trust certificates.
3. Placement of Securities: Securities subject to simplified registration must be placed through a public offering with the intervention of a brokerage firm acting as the placing intermediary (the "Placing Intermediary"). In this regard, the possibility of simplified registration without a public offering and therefore without requiring the intervention of the Placing Intermediary is foreseen for shares, ordinary participation certificates representing them, and equity representative securities of foreign companies when they result from: (i) a spin-off of a Simplified Issuer of shares, and (ii) a merger of companies, when one of them had the status of a Simplified Issuer of shares.
4. Types of Simplified Issuers: Three types of Simplified Issuers are established in relation to the instruments they can register, the issuance amount, and the accumulated amount per issuer or trustor, defined as follows:
   1. Simplified Share Issuers: The Simplified Issuer that requests, obtains, and maintains simplified registration of securities that are shares, ordinary participation certificates representing them, or equity representative securities of foreign companies, subject to a maximum issuance amount and accumulated per fiscal year of up to 1,250,000,000 investment units. Simplified Share Issuers in relation to the instruments to be registered must consider the following:
      • In the case of shares, they must adopt the modality of investment promotion corporations, subject to the Securities Market Law (Ley del Mercado de Valores) (the "Law").
      • In the case of ordinary participation certificates representing shares, they must be registered in a simplified manner in the Registry, representing different share series of the same Simplified Share Issuer.
      • In the case of equity representative securities of foreign companies, they must comply, at least, with the corporate governance requirements established in Article 19 of the Law.
      • In case of distributions of dividends in kind, the Simplified Share Issuer must expressly provide for it in its bylaws, and it may only consist of securities registered in the Registry.
   2. Level I Simplified Issuer: The Simplified Issuer that requests, obtains, and maintains simplified registration of securities that are debt instruments, subject to a maximum issuance amount of up to 75,000,000 investment units and up to an accumulated amount per fiscal year of 900,000,000 investment units.
   3. Level II Simplified Issuer: The Simplified Issuer that requests, obtains, and maintains simplified registration of securities that are debt instruments or asset-backed securities, subject to a maximum issuance amount and accumulated per fiscal year of up to 1,250,000,000 investment units.
5. Audited Financial Statements: To obtain the simplified registration of their securities, issuers must have financial statements audited by an independent external auditor on a consolidated basis (i) for Level I Simplified Issuers, it will be for the last fiscal year in a comparative manner with the financial statements of the previous year and internal quarterly financial statements, which may not be older than the penultimate quarter prior to the placement date, and (ii) for Level II and Simplified Share Issuers, it will be for the last two fiscal years and internal quarterly financial statements, which may not be older than the penultimate quarter prior to the placement date.
6. Placing Intermediary Participation in Simplified Registration: Placing Intermediaries participating in the placement of securities subject to simplified registration must, in addition to the functions of Article 177 Ter of the Law and applicable provisions to brokerage firms, (i) verify that the Simplified Issuer and the securities in question comply with the characteristics and requirements established in the Law, Provisions, regulations, and manuals, (ii) review the offering prospectuses prepared by the Simplified Issuer, (iii) inform institutional or qualified investors participating in the placement about inherent risks, (iv) prepare a file of the Simplified Issuer, which must be kept for 5 years after the simplified registration is canceled, (v) establish in their internal manuals the documentation required from Simplified Issuers by type of security and publish it on their website, and (vi) request the Stock Exchange listing and favorable opinion for registration purposes.
7. Simplified Registration in the Registry: The Stock Exchange will request the simplified registration of the securities from the National Banking and Securities Commission (the "Commission"), integrating the required documentation for each type of security intended to be registered, in accordance with the Provisions. The Commission will have a period of 2 business days from the receipt of the application and annexes to carry out the registration.
8. Supervision, Listing, and Maintenance of Simplified Registration Securities: The Stock Exchange will establish in its internal regulations the additional listing maintenance requirements deemed necessary for the protection of the interests of the investing public, in addition to those established in the Law and the Provisions. It must verify that the Simplified Issuers comply with the requirements of its internal regulations. The Stock Exchanges must inform the Commission in June of each year about the status of the Simplified Issuers regarding compliance with the listing maintenance requirements as of the end of May of the previous year, and disclose this information to the investing public through their website.
9. Periodic Information and Relevant Events: Simplified Issuers must provide the Stock Exchange and the investing public annually, no later than April 30, with: (i) the annual audited financial statements or their equivalent, with a favorable or unqualified opinion by an external auditor, and (ii) the Annual Report corresponding to the previous fiscal year, prepared according to the guidelines established in the applicable provisions for the type of Simplified Issuer. Additionally, Level II Simplified Issuers and Simplified Share Issuers must provide the Stock Exchange and the investing public, within 20 business days after the close of the first three quarters and within 40 business days after the close of the fourth quarter, quarterly financial statements comparing at least the figures for the quarter in question with those of the previous year, as well as any additional information that the Stock Exchange may require in its internal regulations.
   
   The Decree will become effective the day after its publication in the DOF.

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.