The financial rescues and acquisitions currently occurring in the U.S., Europe and other jurisdictions have an important impact from a financial regulatory and antitrust law perspective in Mexico. In particular, when the international financial entity being rescued or acquired has a presence in Mexico, either through affiliates located here or assets owned in the country, it is imperative to understand the implications on its business operations.

These situations may involve:

  1. Certain restrictions from a financial regulatory perspective or the potential need to obtain specific approvals from financial regulators.

Restrictions may differ depending on the type of regulated entity doing business in Mexico (e.g., bank, insurance company, bonding company, stock brokerage, etc.). For instance, authorization from the Mexican Banking and Securities National Commission must be obtained prior to making direct or indirect transfers or acquisitions of shares representing the capital stock of Mexican banks. This authorization may also be required if the acquisition of shares occurs at the parent level outside of Mexico. Mexican banking law provides that if this authorization is not obtained, the direct or indirect acquisition is of no legal effect in Mexico, and the company involved in such acquisition will not be entitled to exercise voting rights or enjoy economic rights in these shares in Mexico. Additionally, fines may be imposed. There are ongoing discussions about how this provision may be enforced or applied if the transfer or acquisition occurs abroad, considering that Mexican law, in essence, is not extraterritorial.

For government acquisitions of shares, there are prohibitions under Mexican law that may also apply to financial entities, depending on their nature. For instance, there are provisions restricting the participation, in any manner, by foreign governmental authorities in the capital stock of certain Mexican financial entities. As this provision is broadly drafted, the current legal discussion is whether this provision applies to indirect government ownership of the capital stock of Mexican financial entities.

In certain cases (e.g., for insurance companies) there are prohibitions against Mexican financial entities forming dependent relationships with foreign governmental agencies. Violation of this prohibition is cause for early dissolution of an insurance company.

Therefore, it is extremely important for foreign financial entities to analyze these issues and ensure that breaches of these Mexican restrictions do not occur.

  1. The potential need to provide notice of a concentration or accumulation of assets with the Mexican Antitrust Commission.

Acquisitions of shares or assets and mergers (among other transactions) occurring outside of Mexico may result in the need to notify the Mexican Antitrust Commission when such transactions have a legal or material effect in Mexico and exceed the thresholds set forth in the Mexican antitrust law. These thresholds are determined in terms of the value of the shares, sales or assets held directly or indirectly by the parties to the transaction in Mexico. Due to minimum capital requirements and the volume of business typically generated by financial entities, these thresholds are easily met in Mexico in connection with acquisitions of shares of foreign financial institutions occurring abroad. For instance, there is a requirement to notify the acquirer and the target in Mexico when private or government entities, directly or indirectly, acquire control of more than 35 percent of the shares or assets of an economic agent, including a financial entity or group, having sales or assets in Mexico exceeding $946,620,000 Mexican Pesos (the equivalent of approximately $75 Million U.S. Dollars, based on the current volatile exchange rate). As opposed to other jurisdictions, Mexican competition law does not provide an exception to the notification requirements based on the fact that the acquirer is a foreign government.