What jurisdictional thresholds trigger a review or application of the law? Is filing mandatory?
A favourable resolution from the Foreign Investment Commission is required for foreign investment to participate in more than 49 per cent of the capital of Mexican companies when the value of the assets of such companies at the date of acquisition exceeds an aggregate amount, for 2019, of 19,558,790,064.21 pesos; this amount is updated annually.
There are additional regulations that must be considered for the authorisation of a transaction, regardless of the nationality of the parties involved. Such is the case of antitrust assessment of a merger or acquisition to determine that the free market access and competition will not be affected.
It is mandatory to obtain, as applicable, the Federal Economic Competition Commission or the Federal Telecommunications Institute authorisation to execute any merger or acquisition transaction if any of the following thresholds are met:
- the transaction is worth, within Mexican territory, an amount in excess to the equivalent of 18 million times the current daily general minimum wage in Mexico City;
- the transaction results in the accumulation of 35 per cent or more of the assets or capital of a party, whose annual sales or assets in Mexico, are worth an amount in excess of the equivalent of 18 million times the current daily general minimum wage in Mexico City; or
- the transaction results in the accumulation of assets or capital in excess of the equivalent to 8.4 million times the current daily general minimum wage in Mexico City, and two or more of parties in the transaction have annual sales or assets in Mexico worth, jointly or separately, an amount in excess of 48 million times the current daily general minimum wage in Mexico City.
What is the procedure for obtaining national interest clearance of transactions and other investments? Are there any filing fees? Is filing mandatory?
Mergers or acquisition transactions are not subject to a specific national interest clearance, nevertheless, the Foreign Investment Commission will consider it in the assessment of the relevant transaction and therefore in its resolution.
Filing fees must be paid in order to request the authorisation from the Foreign Investment Commission, the relevant fees are updated annually.
The Foreign Investment Commission have a standard form to make the submission, which is identified as Form SE-02-007 Questionnaire to request resolution from the Foreign Investment Commission.
The information required to file the request is, among other, the incorporation deed and bylaws of the entity, powers of attorney, information of the legal representative or attorney in fact, a general description of the transaction and project to be developed, audited financial statements, in case of foreign entities, all documents must be apostille or legalised before a Mexican consul and documents in a language other than Spanish must be translated.
Which party is responsible for securing approval?
The process is usually secured by both parties; however, the acquirer is the one that usually provides more information thus has greater responsibilities.Review process
How long does the review process take? What factors determine the timelines for clearance? Are there any exemptions, or any expedited or ‘fast-track’ options?
The Foreign Investment Commission has a period of 35 business days to grant or deny any authorisation and 10 additional days to notify them.
The Federal Economic Competition Commission’s regular time frame to authorise a merger or acquisition, as per applicable law, is 60 business days; however, in practice, it may take longer. There is a ‘fast-track’ process with a time frame to grant the authorisation of 15 days, applicable to cases in which it is clear that the transaction will not damage the free market and competition will not be affected. To be eligible for this option, the acquiring party must not have participated in the relevant market in which the transaction is taking place; the parties must not be competitors between them; and the acquiring party must not already hold control over the acquired party. In our experience, it is difficult to qualify for the ‘fast-track’ process.
If the Federal Economic Competition Commission considers the transaction as a complex case, it has the authority to request additional information or documents, even from third parties, therefore the time frame will be extended. In any case, the Federal Economic Competition Commission has the authority to extend the legal time frames and the process may take more than six months.
As provided in the Federal Telecommunications and Broadcasting Law, any subscription or transfer of shares or part of the capital of an entity holder of a concession to provide telecommunication or broadcasting services, in excess of 10 per cent of its capital must comply with the following:
- it must notify the transaction to the Federal Telecommunications Institute, providing detailed information regarding the possible acquirers;
- the Federal Telecommunications Institute will have a 10-business-day term to request the opinion of the Ministry of Communications and Transportation;
- the Ministry will have 30 calendar days to issue an opinion; and
- the Federal Telecommunications Institute will have 15 business days to object to the transaction providing reasonable justification. If the 15 business days elapsed without the objection from the Institute, it will be considered authorised.
Must the review be completed before the parties can close the transaction? What are the penalties or other consequences if the parties implement the transaction before clearance is obtained?
The parties to a merger or acquisition must obtain authorisation to carry out the transaction prior to:
- its execution;
- the fulfilment of the condition to which the transaction may be subject to;
- the exercise actual or legal control of the other party;
- acquiring actual or legal property or assets of the other party;
- execution of any concentration agreement by the parties; or
- the execution of the last act of a sequence of acts by virtue of which the thresholds mentioned above are met.
The relevant authorities have the power to revoke the authorisations and declare the transaction, agreements, or any act related to it, null and void, without prejudice to the fines and additional liabilities that may be applicable.Involvement of authorities
Can formal or informal guidance from the authorities be obtained prior to a filing being made? Do the authorities expect pre-filing dialogue or meetings?
Foreign investment authorities, antitrust authorities and regulatory authorities may be contacted in order to get formal and informal guidance; however, it is not necessary to have pre-filing meetings in all cases.
It is advisable to have pre-filing conversations and regular communication with the Foreign Investment Commission and the Federal Economic Competition Commission to better understand if the authority is expecting specific or additional information or to explain the transaction structure and market situation.
When are government relations, public affairs, lobbying or other specialists made use of to support the review of a transaction by the authorities? Are there any other lawful informal procedures to facilitate or expedite clearance?
It is important to keep government relations as formal and professional as possible to avoid any misinterpretation of facilitation activities as bribery or corruption of public officials.
A formal meeting can be requested before the Foreign Investment Commission, the National Banking and Securities Commission, the National Insurance and Bonding Commission, the National Retirements Savings System Commission or other regulatory authorities.
The Federal Antitrust Law provides rules regarding interviews between commissioners and representatives of the parties involved in a concentration notification. All commissioners shall be convened to the interview. Each interview shall be recorded and registered, then the information regarding the place, date, time, topic and the names of the attendees shall be published on the Federal Economic Competition Commission website.
What post-closing or retroactive powers do the authorities have to review, challenge or unwind a transaction that was not otherwise subject to pre-merger review?
The Ministry of Economy has the authority to impose penalties to individuals or legal entities that engage in activities, acquisitions or any other acts that require authorisation from the Foreign Investments Commission without having obtained such resolution.
The Federal Economic Competition Commission can review a transaction that was not subject to a pre-merger review in the year following the closing date if there is probable cause of an anticompetitive behaviour in which case it has powers enough to unwind the transaction and fine the parties involved.
Regulatory authorities may impose a wide range of administrative sanctions to regulated entities if they have not obtained the relevant authorisations.