1. What are the key laws and regulations that govern mergers and acquisitions in your jurisdiction?
Regarding the key laws and regulations governing mergers and acquisitions in Mexico, the most important legal orders are:
- Federal Civil Code;
- General Corporations Law ("GCL")
- Federal Commercial Code
- Federal Labor Law
- Foreign Investment Law ("FIL")
- Federal Antitrust Law ("Antitrust Law")
- Negotiable Instruments and Credit Transactions Law
- Securities Law ("SL")
- Financial Institutions Law
- Mutual Funds Law.
- Federal Act to Prevent and Identify Illegally- Funded Transactions and its Regulations.
The most recent legislation regarding corporate governance in Mexico is 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 circulars containing provisions in corporate governance matters, which are applicable to issuers of securities in general, as well 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.
2. What are the government regulators and agencies that play key roles in mergers and acquisitions?
The government regulators and agencies playing key roles in Merger and Acquisitions in Mexico are the following:
- General Bureau of Foreign Investment ("DGIE" - Dirección General de Inversión Extranjera), which is part of the Ministry of Economy.
- Federal Antitrust Commission ("COFECE"- Comisión Federal de Competencia Económica).
3. Are hostile bids permitted? If so, are they common in your jurisdiction?
Hostile takeovers are permitted in our jurisdiction; however, they are very rare in Mexico, since publicly traded companies are few and are mainly controlled by one or a very small group of shareholders. In this regard, we can say that there are not many precedents or significant activity regarding hostile takeovers.
4. What laws may restrict or regulate certain takeovers and mergers, if any? (For example, anti-monopoly or national security legislation).
The laws restricting or regulating certain takeovers and mergers are the following:
- Foreign Investment Law (Ley de Inversión Extranjera)
- Federal Antitrust Law (Ley Federal de Competencia Económica)
- Securities Law (Ley del Mercado de Valores)
5. What documentation is required to implement these transactions?
Regarding documentation to implement these transactions, it is noted that there is a great difference between domestic and cross-border transactions and how both are carried out.
The type of purchase agreements used in Mexico for local or internal purposes significantly differs from the international style of agreement. Mexico has a civil law legal system and civil and commercial codes that regulate civil and commercial transactions, with the result that many matters specifically dealt with in international agreements are not so dealt with in purely Mexican agreements as the parties are aware that many of the specific clauses that would normally be included as terms and conditions of international agreements are implied by statute; therefore, it is not necessary to repeat them or enter into the detail which is necessary for international agreements.
Consequently, contracts made according to Mexican legislation are shorter and not as detailed as international agreements. Mexican legislation allows agreements subject to foreign laws and proceedings, and therefore it is common that cross-border transactions, where the buyer or seller is a foreign company, to have such transaction subject to the law of the country where the buyer or seller is resident. This, in turn, usually results in the agreement following an international format. The result of the foregoing is that, based in our experience, most cross-border transactions entered into by Mexican companies use international style agreements.
6. What government charges or fees apply to these transactions?
Regarding fees or charges applicable to the transactions, formerly the Federal Antitrust Commission had certain fees that companies had to pay in case of transactions exceeding certain amounts. However, with the last reform to the Federal Antitrust Law, such fees were deleted.
On the other hand, regarding Foreign investment matters, a favorable resolution from the National Foreign Investment Commission is required for foreign investment to participate, directly or indirectly, in a percentage higher than 49% of the capital stock of Mexican companies when the aggregate value of the assets of such companies at the date of acquisition exceeds the amount determined annually by the Commission (currently MX$3,601'905,682.86).The governmental fee for the submission of this authorization is the amount of MX$5,861.00.
7. Do shareholders have consent or approval rights in connection with a deal?
As we have previously mentioned, the general shareholders' meeting is the supreme management body of the company.
Shareholders' meeting in case of a Limited Liability stock corporation may be ordinary or extraordinary and must be held at the domicile of the company. Extraordinary meetings are convened to discuss any of the following matters.
- Extension of the duration of the company;
- Early dissolution of the company;
- Increase or reduction of the capital stock;
- Change in the objects of the company;
- Change in the nationality of the company;
- Transformation of the company;
- Merger with and spin-off from another company;
- Issue of preference shares;
- Redemption by the company of its own minimum capital stock and the issuance of participation shares;
- Issue of bonds;
- Any other amendment to the Articles of Incorporation;
- Any other matters where a special quorum is required by law.
In addition, the shareholders' meeting has the right to:
- Appoint and remove the members of the board of directors/sole director at any moment, independently from the annual appointment or ratification mentioned above
- Grant or revoke any power of attorney on behalf of the company in favor of any individuals.
- Agree and ratify all acts and operations of the Company, as well as to determine the scope of, and limits to the duties of the directors by the provisions agreed in the by-laws.
8. Do directors and controlling shareholders owe a duty to the stakeholders in connection with a deal?
Regarding the operation and management of the corporate entities in Mexico, the general shareholders meeting (in S.A.s) / general partners' meeting (in S.de R.L.s) is the supreme management body of any company, and it operates through the shareholders/partners.
The management structure of a Limited Liability Company (S. de R.L.) can be composed by a sole manager or board of managers, while a Limited Liability Stock Corporation (S.A.) is managed by a sole director or a board of directors. Among their responsibilities in any Mexican company are the company's compliance with any and all applicable laws, company by-laws, management and accounting and most importantly agreements made in shareholders' meetings. They may be assisted by managers appointed by the shareholders' meeting or the board of directors who will also be equally liable as directors.
According to the GCL, the Meeting may agree and ratify all acts and operations of the Company. In addition, shareholders/partners of such companies may determine the scope of, and limits to, the duties of the directors/managers by the provisions agreed in the by-laws.
This meeting has the right to appoint and remove the board of directors/sole director or board of managers/sole manager, as applicable. In case of investment promotion companies, shareholders may carry out the following in addition to complying with the GCL:
- Widen, limit or deny a preferential right to subscribe for shares in the company; and limit the liability for loss or damage of directors and officers of the company, arising from their conduct or decisions;
- Agree upon restrictions on the transfer of shares within the same series or class;
- Implement mechanisms to resolve differences among shareholders with respect to specific matters;
- Issue shares different from those stipulated in the GCL, and those that do not have a right to vote or have a voting right restricted to certain matters, those that confer financial rights other than the right to vote or exclusively the right to vote, or those that limit or widen the distribution of dividends or other special financial rights, subject to the provisions of the GCL; and
- Establish a basis for requiring or permitting the withdrawal of shareholders or reduction of capital, other than that set out in the GCL, as well as the price or basis for determining price;
Moreover, regarding key liability restrictions in this regard, in accordance to the Immigration Law and General Population Law Regulations, foreigners or expatriates are entitled to render services as managers of Mexican entities, provided that the National Immigration Institute issues the proper immigration form. Before performing any activity in Mexico, companies, as well as foreigners, are required to notify the Immigration authorities in order to obtain approval.
Liability of directors and officers in a company shall be governed by the company's by-laws. Moreover, the GLC provides the rights and duties of the board members, which include the following:
- To protect the company's interests.
- To represent the members' or shareholders' interests.
- To carry out or conduct the resolutions adopted by the partners' or shareholders' meeting.
- To manage the company with the same care that would be expected to be exercised in the management of the members' personal business.
Moreover, in Mexico managers and directors are:
- Jointly liable with the company to ensure the performances of members' or shareholders' resolutions, including actions related to shareholder contributions and dividends.
- Liable for damages suffered by the company as a result of their misconduct.
- Responsible for the management of the company.
Finally, regarding parent companies, they are not liable for their subsidiaries' liabilities. Parent companies liability is limited to the total amount of its capital contribution to the subsidiary.
The by-laws may require directors to make a deposit in escrow to guarantee their responsibilities in the performance of their duties. A shareholder or group of shareholders representing 33 per cent of the capital stock of a privately held company, and in the case of public companies the shareholder or group of shareholders representing 5 or sometimes 15 per cent, may pursue a civil responsibility claim against directors.
Additionally, SL pursues director compliance with:
- Fiduciary duty of diligence, which requires directors to act in good faith and in the best interests of the company and the legal entities controlled by the company; and
- Duty of loyalty, which requires director's confidentiality regarding non-public company information, and prevents such individuals from inappropriately gaining any economic benefit from his or her position.
Instead, controlling shareholders have no duties regarding any business combination transaction.
9. In what circumstances are break-up fees payable by the target company?
Break-up fees and reverse break-up fees are not regulated in Mexican law and therefore are limited only according to either agreement among the parties or the general provisions (applicable to any penalty) which provide that the penalty may not exceed the amount of the main obligation.
Regarding M&A, it should be considered that the amount of the main obligation is that of the purchase price, which leads to the conclusion that, from a practical point of view, in practice there is no limit on break-up and reverse break-up fees.
Regarding a company's ability to protect deals from third-party bidders, this protection may be included in the agreement, letter of intent or any other document whatsoever, including a penalty in case of breach which may not exceed the amount of the main obligation (purchase price).
10. Can conditions be attached to an offer in connection with a deal?
Offers in connection with a deal may be subject to any conditions such as:
- A satisfactory due diligence process;
- Positive financial conditions of the company;
- The obtaining of all corporate and necessary governmental approvals and authorizations;
- That the transaction is concluded within a determined period of time;
- Subject to the absence of adverse changes or modifications;
- Subject to the obtaining of financing, etc.
11. How is financing dealt with in the transaction document? Are there regulations that require a minimum level of financing?
It is a customary practice to execute a loan agreement, a security interest (e.g. mortgages and pledges) or guarantees and to document such debts by means of the issuance promissory notes. There are no regulations that require a minimum level of financing.
12. Can minority shareholders be squeezed out? If so, what procedures must be observed?
Minority stockholders may not be squeezed out by means other than acquisition of their stock, since the GLC establishes various provisions governing minority rights.
On the other hand, The SL has created a new structure: the investment promotion company. The provisions in this regard include diverse guidelines for corporate governance. These companies are designed to serve as an intermediate stage between a limited liability stock corporation or limited liability partnership and a stock exchange company with respect to the legal system applicable to the protection of minorities, disclosure of information and good corporate governance requirements.
Investment promotion companies are regulated in such a way as to give them certain exemptions from the provisions of the GCL, and to provide greater protection for minority shareholders and establish standards for good corporate governance practices. These exceptions permit the company to carry out transactions that are important for it to receive private equity capital.
The investment promotion company, identified in Mexico as "SAPI" (IPC), may be adopted by a new company to be incorporated or by an existing company. Regarding the latter scenario, in order for an existing company to become an investment promotion company, an extraordinary shareholders' meeting must approve such modification.
This kind of company is the ideal vehicle to receive investment from private equity funds since, unlike stock corporations where the guiding principle to establish the rights of majorities and minorities is almost exclusively the percentage of participation in the capital stock of the Company, the IPC establishes a different criteria in order to protect such rights.
The following are some of the relevant aspects and criteria that pose certain of the main benefits of the Investment Promotion Companies:
- They provide a more flexible and modern corporate regime than a normal stock corporation among other matters.
- They allow minority shareholders to exercise control over the corporate governance of the company, regardless of their percentage in the capital stock of the same.
- They allow more efficient mechanisms in order to implement outflow strategies of private capital stock.
- The percentages for the appointment of directors or statutory auditors are lower than those established for stock corporations.
Therefore, the IPC can adopt flexible measures in terms of its operation which cannot be adopted by the stock corporation, and even freely agree on provisions restricted or prohibited under the GLC.
13. What is the waiting or notification period that must be observed before completing a business combination?
Other than those provided for in the Antitrust Law, there are no waiting periods for completing business combinations; however, the FIL provides that an authorisation from the National Commission of Foreign Investment is required in those cases in which a foreign entity intends to participate in a Mexican company whose assets exceed about US$245.83 million dollars. According to the FIL, the period for this approval is 45 working days from the submission of the request; however, in practice this can take additional time depending on the commission's workload.
14. Are there any industry-specific rules that apply to the company being acquired?
There are no additional restrictions other than Federal Antitrust Law (Antitrust Law) and the Foreign Investment Law (FIL), the latter being applicable to certain industries. The restrictions provided by the FIL apply to the following:
- Activities solely carried out by the state (i.e., no private parties may be involved), such as petroleum and other hydrocarbons, basic petrochemicals, electricity, generation of nuclear energy, radioactive minerals, telegraphs, radiotelegraphy, mail services, issuance of paper currency, production of coins, control supervision and surveillance of seaports, airports and helipads, among others;
- Activities reserved exclusively to Mexicans or to Mexican companies with a clause excluding foreign nationals, such as domestic land transportation of passengers, tourism and freight (not including messenger or courier services), gasoline retail sales and distribution of liquefied petroleum gas, and radio broadcasting services, development bank Institutions, among others; and
- Activities and acquisition subject to specific regulation such as up to 10 per cent in cooperative companies for production, up to 25 per cent in domestic air transportation, air taxi transportation, and specialized air transportation, and up to 49 per cent in manufacture and sale of explosives, firearms, cartridges, ammunitions and fireworks, not including the purchase and use of explosives for industrial and mining activities, and the development of explosive mixtures for its consumption in such activities, printing and publishing of newspapers for circulation in national territory, freshwater, coastal water and exclusive economic zone fishing, excluding aquaculture, integral port administration, port pilot services for inland navigation under the terms of the law governing the matter, shipping companies engaged in commercial exploitation of ships for inland and coastal navigation (excluding tourism cruises and exploitation of marine dredges) and devices for port construction, conservation and operation, supply of fuel and lubricants for ships, airplanes and railway equipment, concessionaire companies in terms of Articles 11 and 12 of the Federal Telecommunications Law, among others.
Due to the foregoing, those industries having specific rules are oil exploration, transport, telecommunications, and the industries that are subject to special regulations when there are foreign nationals involved.
15. Are cross-border transactions subject to certain special legal requirements?
Cross-border transactions are structured taking into consideration the most suitable investment vehicle allowed under Mexican Law. For instance, it may be structured through a Mexican entity, with the limited liability stock corporations and limited liability partnerships being the most accepted structures in the business field, through a branch or through a trust.
The most applicable pieces of legislation regarding cross-border transactions are the Antitrust Law and the Foreign Investment Law (FIL).
Regarding antitrust, what is commonly known in the antitrust legislation of some countries as 'mergers and acquisitions' is, under Mexican antitrust law, known as 'concentration.' Article 16 of the Federal Antitrust Law (the Law) defines a 'concentration' as 'the merger, acquisition of control, or any other action between or among competitors, suppliers, customers or other economic agents to consolidate corporations, associations, stock holdings, partnership interests, trusts, or assets in general.' The Law further mentions that the Federal Antitrust Commission shall oppose and penalise any concentration having the purpose or effect of restraining, injuring or preventing the free and open competition in the market of equal, similar or substantially comparable products and services. In order to be in a position to analyse which transactions may have these effects, article 20 of the Law establishes the economic thresholds, which, if exceeded, require a transaction to be notified.
The legal basis of the obligations of Mexican companies with foreign investment is the FIL and its regulations. Article 8 of the FIL requires that the National Foreign Investment Commission approve any foreign investment of more than 49 per cent in a number of specific sectors (see question 14).
16. How will the labor regulations in your jurisdiction affect the new employment relationships?
The basic regulatory framework governing labor and employee benefits are the Federal Labor Law, the Social Security Law and the Housing Law.
Regarding labor regulations, on November 2013, and after 40 years of not having made any reform, the legislative power approved an amendment to the Federal Labor Law, which includes the following:
- New hiring modalities in probationary periods for new employees, initial training, and seasonal employments.
- To regulate "outsourcing" scheme or subcontracting of personnel in order to ensure the employer's compliance with social security and health obligations.
- To regulate hourly payments.
- The payment of three months' compensation and back wages to workers who have been fired and whose employer does not prove the rescission causes in court.
- Obligation to publish the bylaws of the unions in the website of the Labor Ministry.
- The reform also strengthens the rights of women to expressly prohibit discrimination and harassment, and punish with the termination of labor relationship to such people who promote such practices.
- To regulate work for domestic workers, expressly to establish rest periods for them.
In case of a business combination, the acquisition vehicles should be structured considering the labor structure of the target companies and the best manner for the transfer of the employees considering the most beneficial employment terms that are available in light of the Mexican Federal Labor Law, such as regarding the Christmas bonus, vacation and vacation premium, and any other additional provisions granted to employees for their work.
One of the key factors for a business combination is to analyze and determine the structure to be adopted for the transfer of the employees. For instance, regarding asset acquisitions, a common manner to honor the labor terms of the target employees is to carry out a labor substitution, whereby a new employer continues with the labor relationship and honors the terms and conditions granted in favor of the employees prior to the acquisition.
This means that when an acquisition or merger is taking place between companies, employees are protected by law with the most favorable employment benefits of the companies involved.
17. Have there been any recent proposals for reforms or regulatory changes that will impact M&A activity?
Insurance and Surety Companies Law
On April 4, 2013 the Federal Official Gazette published an executive order issuing the Insurance and Surety Companies Law. The Insurance and Surety Companies Law will come into full force and effect in two years, calculated from the date of the publication, and repeals 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 efficient, 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 authorize concessions and granting it authority in antitrust matters regarding broadcasting and telecommunications sectors.
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 organizations 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 jewelry, art, vehicles, donations received by not-for-profit organizations, 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 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 simplify 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.
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 the future years it is envisioned that the foreign investment will increase in this sector allowing international companies to incorporate subsidiaries in Mexico.
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:
- Promulgation of a new act to regulate financial institutions, which purpose is to strengthen the corporate governance of holding companies.
- Strengthening of the National Financial Services Users Protection Commission ("Condusef").
- Multiple-purpose financial institutions ("SOFOMES") and general deposit warehouses.
- Development Banking System: the financial reform has as another objective, to make the legal framework governing the Development Bank more flexible.
- Several provisions of the Community Savings and Loan Act and Cooperative Savings and Loan Associations Act are amended or repealed.
- The Financial Reform removes limits to foreign investment in financial institutions.
New Federal Antitrust Law
A new Federal Antitrust Law was published on May 23, 2014 in the Federal Official Gazette, to enter into force on July 7, 2014.
The new law arises from the June 2013 amendments to Article 28 of the Mexican Constitution that had, as their, specific purpose, to create both the Federal Antitrust 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 organization and operating principles.
As a result of the foregoing, most of the changes in the new Law specifically deal with the organization, 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 analyze 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, 2014m the Federal Official Gazette published the Federal Law of Telecommunications and Broadcasting, after the passage last Thursday, July 10, of the 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:
- 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.
- Dominance. The FIT may declare that a company by sector and not for the services it provides.
- Interconnection Fees. The FIT will determine whether a company is dominant in some sectors, and may impose measures to restrict its market control.
- New Television Networks. The state will invite tenders for two new television networks concessions.
- Digital Television. December 31, 2015 was established as the deadline to complete the transition from analog to digital television.
- 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.
- 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.
Amendments, to the General Corporations Law, Code of Commerce, Law of General Negotiable Instruments and Credit Operations, Investment Funds Law, Federal Governmental Fees and Charges Law, and the Federal Government Organization Law
On June 13, 2014, several amendments were published in the Federal Official Gazette in regards 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 Organization Law.
Code of Commerce.
The most important points to highlight in these new reforms of the Code of Commerce are as follows:
- Publication of Commercial Status: The obligation for merchants to publish their commercial status in the newspaper was deleted.
- 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 Public Registry of Commerce. However, now such publications shall be made by an electronic system to be developed and implemented by the Ministry of Economy.
General Corporation Law.
The most important points to highlight in these new reforms of the GLC are as follows:
- Now the GLC authorizes 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 right to exercise preemptive rights different from those established under such legislation.
- 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 percent to 25 percent of the capital stock.
- 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.
- 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 with the operation such electronic publication system.
General Negotiable Instruments and Credit Operations Law.
The most important points to highlight in these new reforms of this law are as follows:
- Trusts related to personal property are enforceable against third parties, as of the moment in which same are registered at the Single Registry of Guaranties over personal property (or RUG by its initials in Spanish).
- 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.
- Non-possessory pledges and guarantee 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 filings 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) modification of a foreigners' exclusion clause to a foreigners' admission clause.
Federal Government Organization Law.
The Ministry of Economy is expressly authorized to carry out the operation of the electronic system by which the publications in accordance with the commercial laws should be conducted.
Originally published by Lexis Nexis Mergers & Acquisitions Law Guide 2015.
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.