Originally published in Global Legal Insights, Mergers & Acquisitions, Fifth Edition

Regarding the main sources related to corporate governance in our country, the most important legal orders are the General Corporations Law (GCL), the Federal Code of Commerce, the Securities Law (SL), the Financial Institutions Law, the Mutual Funds Law and the Federal Act to Prevent and Identify Illegally-Funded Transactions and its Regulations.

The most recent legislation regarding corporate governance in Mexico was the new Securities Law (SL), which became effective in June 2006.

Moreover, it is important to note that the National Banking and Securities Commission issues securities and circulars containing provisions in corporate governance matters, which are applicable to issuers of securities in general, as well as to companies quoted on stock exchanges.

In addition, the Code for the Improvement of Corporate Practices was issued by the Mexican Business Coordination Council, which establishes the guidelines and regulations for the improvement of corporate conduct by means of enhancing corporate governance, covering the following areas: Corporate Governance; Shareholders' Meetings; Board of Directors; Audits; Evaluation and Compensation; and Finance and Planning. This code is based on principles and provisions; however, it is not mandatory.

Significant deals and highlights

During 2015, Mexico's transactional market continued to show that it remains strong, with positive numbers in both number of transactions and volume of investment.

Currently, the telecommunications, media and technology ("TMT") sector has continued expanding and evidently influencing cultures worldwide. The TMT sector has assumed more importance throughout the years as revolutionary technological changes are happening every day, and in recent decades humanity has witnessed remarkable developments in this respect, including the evolution of previously existing technologies and the emergence of new telecommunications and technologies, satellites, cable television, fibre optics, video cassettes, compact discs, computerised image-making and other computer and digital technology, among others.

According to a study by the firm Transactional Track Record (TTR), in 2015 there was an increase of 4.17% in the number of mergers and acquisitions, compared to 2014.

Regarding investment volume, the amount registered between October and December 2015 has been put at US$ 3,163m.

Among the most important transactions carried out during 2015 was the acquisition of the Nextel Mexican subsidiary for US$ 1,1875m.

Another important transaction during 2015 was the purchase of Comercial Mexicana by Soriana, for an amount of US$ 211m.

Linzor Capital Partners purchased the assets of General Electric's Industrial Equipment Leasing Business for US$ 1,100m. On the other hand, Grupo Televisa acquired Cablevision Red Group, including its subsidiaries, for the approximate amount of US$ 600m.

However, during the first semester of 2015, the M&A market in Mexico represented 15% of the amount of M&A transactions in Latin America with 73 transactions and a growth of 12% over the transactions carried out during 2014.

Of the transactions mentioned in the paragraph above for the first semester of 2015, 47% were carried out with domestic investment while the 53% remaining capital was acquired with foreign investment; 22% of the capital investment in Mexico was from United States and Canada, 25% from Europe, 5% from Asia, and 1% from the rest of Latin America.

By the end of 2015 the final count of M&A transactions in Mexico was 260, with a total value of over US$ 20.51bn.

The most dynamic sector on the M&A market during 2015 was the Real Estate industry with 68 transactions, boosted by Fibre and Infrastructure projects, followed by the manufacturing industry with 47 transactions.

Key developments

New Amparo Law

On April 2, 2013, there was published in the Federal Official Gazette the new Amparo Law, Implementing Articles 103 and 107 of Mexico's Federal Constitution, thereby repealing the former Amparo Law. (In Mexico, amparo is an effective and inexpensive instrument for the protection of individual rights.) Pursuant to the f rst transitory article, the new Law became effective the day following its publication, that was, April 3, 2013.

Some of the most relevant aspects of the new Law are the following:

1. Human rights have been added as a matter to be protected in an amparo action, in line with the recent constitutional amendments.

2. A "legitimate interest" is now the basis for a petitioner to file an amparo action, increasing the possibility of becoming a party thereto and without the need of showing direct damage to any substantive right.

3. Actions by private parties may now be contested in an amparo action, provided such actions are tantamount to acts of authority under a statute.

4. The electronic f ling and processing of an amparo action are now permitted.

5. A new type of amparo action, called "amparo adhesivo" (supporting amparo action) has been introduced.

6. A general declaration of unconstitutionality of statutes, except for tax regulations, as well as fast-track for amparo actions in urgent cases, are now contemplated.

7. No stay pending a final decision on an amparo action may be granted, when preventing the government from using or exploiting any federal public property covered by Article 27 of the Mexico's Federal Constitution.

8. Circuit en banc courts (plenos de circuito) have been created and empowered to decide on conflicting opinions issued by courts in their circuits.

The new Amparo Law concludes the implementation of the June 2011 constitutional amendments, which recognised the human rights covered by the international treaties of which Mexico is a member.

Insurance and Surety Companies Law

On April 4, 2015, the Insurance and Surety Companies Law entered into full force and repealed the Mutual Insurance and Insurance Companies Law and the Federal Surety Companies Law in their entirety. The purpose of this Law is to govern the incorporation and operation of insurance, surety, and mutual insurance companies, as well as the activities and transactions that they are allowed to carry out.

Telecommunications and antitrust

The Reform in Telecommunications, Radio Broadcasting and Antitrust matters was proposed on March 12, 2013 by the Federal Government and the coordinators of several political parties. It is intended to strengthen the rights related to freedom of expression and information; to adopt measures in order to encourage competition in open and pay television, radio, mobile and fixed telephony, data and telecommunications services in general; to ensure effective competition in all sectors; and to create conditions to increase substantially the telecommunication infrastructure and the obligation to make its use more effcient, which has a direct impact on the lowering of prices and increase of service quality. On June 11, 2013 the Federal Official Gazette published the Executive Order Amending Articles 6, 7, 27, 28, 73, 78, 94, and 105 of the Mexican Federal Constitution in the Area of Telecommunications, which amends various constitutional provisions.

Moreover, this reform includes the State's obligation to ensure access to information and communication technologies, as well as broadcasting and telecommunications services, including broadband and internet. It also creates the Federal Telecommunications Institute (IFETEL) as an independent constitutional body, for the efficient development of broadcasting and telecommunications, whose duties shall be the regulation, promotion and supervision of the use, development and exploitation of radio spectrum, networks and the provision of broadcasting and telecommunication services, as well as access to active and passive infrastructure, and other essential inputs, entitling this institute to grant, revoke and authorise concessions and granting it authority in economic competition matters regarding broadcasting and telecommunications sectors.

As a result of this reform in 2015, AT&T invested in Mexico with the acquisition of the Mexican telecommunications company Iusacell and the Mexican subsidiary of Nextel.

Federal Act to Prevent and Identify Illegally-Funded Transactions and its regulations

On August 16, 2013, the Federal Official Gazette published the Regulations to the Federal Act to Prevent and Identify Illegally-Funded Transactions.

The purpose of this Law is to protect the financial system and the economy of the country by providing means and procedures to detect and prevent activities or transactions involving illegally-obtained funds. The financial structures of criminal organisations are also targeted in order to avoid their being operated with illegal resources.

The act also imposes several obligations on corporations and particulars. One of these obligations is the registration and filing of operation notices for carrying out activities considered as vulnerable in terms of the law, carried out since September 2013. A great number of commercial activities such as gaming and sweepstakes, draws, issuing of credit and prepaid cards, traveller's checks, construction services, buying and selling of precious metals and jewellery, art, vehicles, donations received by not-for-profit organisations, transport of values, professional services, foreign commerce services, leases and other activities are now subject to new restrictions and limitations that must be fulfilled so as to avoid a possible sanction.

On July 24, 2014, the agreement 09/2014, which amends the general rules that refer to the Federal Act to Prevent and Identify Illegally-Funded Transactions, was published on the Federal Official Gazette.

This agreement increases some of the definitions, establishes a procedure by virtue of which notifications will be considered to be effective, empowers the Tax Administration Service to require information and documents regarding registration and notices of those who carry out vulnerable activities, and simplifies the identification of clients for some vulnerable activities.

This agreement incorporates Article 27 BIS, which establishes various exceptions with respect to the obligation to give notice for certain vulnerable activities.

Tax reform

After obtaining the opinion of the Commission of Finance and Public Credit, in October, 2013, Congress approved the economic package proposed by President Enrique Peña Nieto on September 8. This package includes substantial amendments to various tax laws including the repeal of the tax deposits in cash and the single rate business tax, as well as new provisions regarding value-added tax, special tax on production and services, federal fee law, income tax, etc.

Constitutional reform to the energy and electric sectors

On December 12, 2013, the Mexican Congress approved amendments to Articles 25, 27 and 28 of the Mexican Constitution to allow private investment in the oil and hydrocarbon industry, as well as activities related to the electricity industry.

On December 20, 2013, an executive order was published in the Federal Official Gazette amending and supplementing Articles 25, 27 and 28 of the Mexico's Federal Constitution in this regard, as well as Electricity matters. The Executive Order became effective the date following its publication; thus, as of December 21, 2013, the federal Congress will have several terms to adapt the legal framework on oil, hydrocarbon and electricity matters, as well as issue supplemental laws and create public entities.

Due to the foregoing, in future years it is envisioned that the foreign investment will increase in this sector, allowing international companies to incorporate subsidiaries in Mexico.

Financial reform

On January 10, 2014, the Federal Official Gazette published the Financial Reform. Several statutes were amended and a new act to regulate financial institutions was issued. The most relevant aspects of 2014 Financial Reform are as follows:

a) Promulgation of a new act to regulate financial institutions, which purpose is to strengthen the corporate governance of holding companies.

b) Strengthening of the National Financial Services Users Protection Commission ("Condusef").

c) Multiple-purpose financial institutions ("SOFOMES") and general deposit warehouses.

d) Development Banking System: the financial reform has as another objective, to make the legal framework governing the Development Bank more flexible.

e) Several provisions of the Community Savings and Loan Act and Cooperative Savings and Loan Associations Act are amended or repealed.

f) The financial Reform removes limits to foreign investment in financial institutions.

New Federal Competition Law of Mexico

A new Federal Economic Competition Act was published on May 23, 2014 in the Federal Official Gazette, to enter into force on July 7, 2014. This new Law resulted from the bill submitted by the President of Mexico in February 2014 and from all amendments and additions to the bill that were approved by the Senate and the Chamber of Deputies.

The new law arises from the June 2013 amendments to Article 28 of the Mexican Constitution that created both the Federal Economic Competition Commission ("COFECE" − Comisión Federal de Competencia Económica) and the Federal Telecommunications Institute ("IFT" − Instituto Federal de Telecomunicaciones) as constitutionally autonomous agencies independent from the executive branch, and to set their basic organisation and operating principles.

As a result of the foregoing, most of the changes in the new Law specifically deal with the organisation, powers and composition of the COFECE. As regards its substantive or underlying aspects, the new Law essentially continues the framework of the repealed law concerning the analysis and management of monopolistic practices, with the addition of new concepts such as barriers to competition and access to essential raw materials.

The new Law also incorporates innovative procedures, including procedures to analyse and regulate barriers to competition and access to essential raw materials, and amends the rules to process the issuing of opinions and investigations. In this latter case, this is with the specific intention of conforming to the principle of impartiality in decision-making as set forth in Article 28 of the Mexican Constitution. Finally, several aspects formerly in effect at the regulatory level are now raised to the statutory level.

New Federal Law on Telecommunications and Broadcasting

On July 14, 2014 the Federal Official Gazette published the Federal Law of Telecommunications and Broadcasting, after the passage on Thursday, July 10, of a new law by the Federal Congress.

The purpose of the new law is to regulate the use of radio spectrum, public telecommunications networks, orbital resources, satellite communication, the provision of public telecommunications service, the broadcasting rights of users, and the process of free competition in these sectors.

The most important points to highlight in this new legislation are:

a) Federal Institute of Telecommunications ("FIT"). It will be the regulator of the entire sector, grant concessions, issue declarations of dominance and have the authority to oversee audiovisual content.

b) Dominance. The FIT may declare that a company is dominant by sector and not by the services it provides.

c) Interconnection Fees. The FIT will determine whether a company is dominant in some sectors, and may impose measures to restrict its market control.

d) New Television Networks. The state will invite tenders for two new television networks concessions.

e) Digital Television. December 31, 2015 was established as the deadline to complete the transition from analogue to digital television.

f) Failure to Comply and Penalties. The legislation establishes the types of noncompliance by concessionaire, and who has the jurisdiction to impose the appropriate sanctions. Among them are the Consumer Protection Agency, Mexico´s Department of the Interior, and the Federal Institute of Telecommunications.

g) Intervention and Geolocation. It established that private communications may be intercepted for public security and investigations by the authorities, and the application of similar security measures.

Negotiable Instruments and Credit Operations, Investment Funds Law, Federal Governmental Fees and Charges Law, and the Federal Government Organisation Law

On June 13, 2014, several amendments were published in the Federal Official Gazette in regard to the General Corporations Law, Federal Code of Commerce, Law of General Negotiable Instruments and Credit Operations, Investment Funds Law, Federal Governmental Fees and Charges Law, and the Federal Government Organisation Law.

Code of Commerce

The most important points to highlight in these new reforms of the Code of Commerce are as follows:

a) Publication of Commercial Status: The obligation for merchants to publish their commercial status in the newspaper was deleted.

b) Publications of several commercial acts by means of an electronic system: Before this reform, the publication of several commercial acts had to be made by means of the Official Gazettes of the domicile of each company. However, now such publications shall be made by an electronic system to be developed and implemented by the Ministry of Economy. Notwithstanding the foregoing, certain acts such as extraordinary meetings, bylaws amendments, and appointment or removal of board members of commercial companies will continue to obtain their publicity through a recordal at the Public Registry of Commerce.

General Corporation Law

The most important points to highlight in these new reforms of the GLC are as follows:

a) The GLC now authorises companies to establish in their bylaws any provisions regarding puts, calls, drag-along and tag-along agreements, transfer and ownership rights, sale rights as well as the right to exercise pre-emptive rights different from those established under such legislation.

b) Benefit to minority shareholders by reducing the minimum percentage required for the exercise of certain rights, such as the right to delay meetings and the right to exercise actions against the directors of a company, from 33% to 25% of the capital stock.

c) A new electronic system in order to register and publish certain legal acts, including publication of notices to call General Shareholders' Meetings; publication of extracts of the spin-off resolutions; publication of merger agreements; and publication of final balance sheets in case of company liquidation.

d) The Ministry of Economy, which is the entity appointed for the creation and implementation of such electronic system mentioned above, has a term of one year following the publication of this reform to initiate the operation such electronic publication system.

General Negotiable Instruments and Credit Operations Law

The most important points to highlight in the new reforms of this law are as follows:

a) Trusts related to personal property are enforceable against third parties, as of the moment in which the same are registered at the Single Registry of Guaranties over personal property (or RUG by its initials in Spanish).

b) The parties in a guarantee trust may agree among themselves who will be responsible for damages, loss, or impairment of the trust assets, regardless of who holds the possession of same.

c) Non-possessory pledges and guaranty trust agreements shall be valid upon execution, and the invalidity of any provision of the same shall not invalidate the entire pledge or trust.

Investment Funds Law

As a result of the implementation of the electronic system for publications entrusted to the Ministry of Economy, this law revokes the exception related to the publication of financial statements of investment fund operating companies, investment fund share distributing companies and share appraisal companies in the Federal Official Gazette

Federal Governmental Fees and Charges Law

The payment obligations for late fi lings of the following notices are deleted: (i) liquidation, merger or spin-off of companies; (ii) use of permit for the incorporation of companies or associations and changes of corporate name or purpose; and (iii) modifi cation of a foreigners' exclusion clause to a foreigners' admission clause.

Federal Government Organisation Law

The Ministry of Economy is expressly authorised to carry out the operation of the electronic system in which the publications in accordance with the commercial laws should be conducted.

Industry sector focus

a) Renewable energy industry: By the end of 2014, Mexico had an installed effective capacity to generate 16,070 MW of electricity from renewable sources (wind, solar, hydraulic, and geothermal and biomass). This is in accordance with ProMéxico's estimates using data from the Energy Regulatory Commission (CRE) and the Federal Electricity Commission (CFE).

It is estimated that by 2026 the installed capacity to generate electricity from renewable sources will increase by 20,544 MW and that wind and hydraulic sources will have the largest share, with 58.6% and 27.3%, respectively. This projection includes the modalities of public service, self-supply and distributed generation.

b) Aerospace industry: According to reports provided by ProMexico, Mexico has consolidated its position as a global leader in the aerospace sector. The country's exports have shown an annual growth of 17% in the 2004-2014 period. During 2014, the amount exported reached $6.36bn. Due to its geographic location, Mexico is the meeting point of the world's two main aerospace manufacturing corridors, both in North America. Mexico's access to the Asian and European markets makes it the aerospace logistics and manufacturing center of the Americas.

c) Processed foods industry: The processed food industry in Mexico has reported significant growth in recent years, mainly due to its productivity and input availability, as well as the country's macroeconomic solidity, competitiveness to attract foreign investment and capacity to be an export platform to more than 40 countries with which it has trade agreements. In 2015, Mexico's processed food industry produced $135.5bn, which represented 23.4% of the country's manufacturing GDP and 3.9% of its total GDP.

d) Automotive and auto parts industry: Mexico is a producer of vehicles of great quality and innovation. Vehicles made in Mexico comply with high standards and are sold in the most demanding and competitive international markets. In 2012, the automotive industry had an automobile production of 2.8 million vehicles, being the fifth biggest vehicle producer in the world with a production worth $74.79bn.

e) Electrical industry: Mexico is the leading producer in the electrical industry in Latin America, ranking as one of the main investment destinations. Furthermore, Mexico is the leading supplier to the US market of electricity generation products and distribution equipment.

The industry has strengthened over time. In 2012, its total production reached $28.843bn dollars, of which 54.2% was concentrated in the wiring, cabling and battery segment; 26.8% in electricity distribution and control equipment; and 19.0% in production of electric motors and generators.

f) Health services industry: According to PROMEXICO (the Mexican Government institution in charge of strengthening Mexico's participation in the international economy), through Mexico's National Accounting System, INEGI, it is estimated that this sector in Mexico produced $8.05bn in 2012 from medical device production in our country.

g) Pharmaceutical industry: It is estimated that the industry in Mexico will produce $24.211bn dollars by 2020. Over the last eight years, the Mexican Pharmaceutical industry has secured over $3.46bn dollars from foreign investment. Mexico's strengths in this industry are its low manufacturing costs.

h) Telecommunications, media and technology: This sector has expanded and evidently influences cultures worldwide. The TMT sector has gained more importance over the years since revolutionary technological changes are happening every day in this respect, including the evolution of previously existing technologies and the emergence of new telecommunications and technologies, satellites, cable television, fibre optics, video cassettes, compact disc, computerised image-making and other computer and digital technology, among others.

The year ahead

As in 2015, Mexico is expected to be an important location for mergers and acquisitions during 2016. Structural reforms recently adopted in Mexico have led to a growing interest in the corporate world in participating directly via mergers and acquisitions.

According to diverse expert opinions, including the Business Coordination Council (a private organisation in charge of coordinating the policies and actions of business organisations, and identifying strategic positions with specific solutions to help design public policies), 2016 will show a growth in the Mexican Economy from 3% to 3.5%. Due to the approval of the energy reform at the end of 2013, the greatest focus of attention will still be on the clean energy sector (mainly wind, solar, geothermal and biogas). This is due to the fact that companies in the United States, Japan and Europe have expressed interest in finding partners for conversion projects in power generation plants. Other strongest expectations exist in the telecommunications and services sectors.

As a consequence of the energy reform, in 2016 the Energy Regulation Commission will carry out several public bids for extraction, exploration and exploitation of hydrocarbons on Mexican Territory.

Notwithstanding the globalised markets scenario and the worldwide current economic downturn, Mexico continues to be an attractive location for investment and commercial transactions. M&A activity has maintained a great level and it is likely that it will continue in such a manner for this coming year.

Despite any negative predictions, Mexico remains a resilient investment market and maintains a solid position as one of the main investment destinations in Latin America. Moreover, since our country has a close commercial relationship with the United States, it is expected that many investors will continue to invest in Mexico on an ongoing basis. Without a doubt, nowadays there is a wide range of opportunities around M&A, since many foreign companies are looking to invest in Mexico, as well as Mexican companies continue expanding abroad. Due to the foregoing, the positive outlook in terms of M&A in Mexico continues growing.

In Mexico, the expectations of company sale and purchase transactions, both announced and effectively closed, are high. As previously mentioned, structural reforms recently adopted in Mexico have led to a growing interest in worldwide corporations participating directly through partnership schemes or by means of mergers and acquisitions in various sectors of the country.

Therefore we anticipate a significant increase in both volume and value of domestic transactions, particularly in the energy and infrastructure sectors as well as in the financial, healthcare, real estate and consumption industries.

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.