Date of reorganisation

Can a corporate reorganisation be backdated or deemed to have already taken place, for example from the start of the financial year?

As a general rule, backdating is not acceptable as a sound or legal practice in Mexico. A transaction should be given effect at least as of the date in which the relevant contract is executed. As discussed above, a transaction may become effective after a certain period of its recording with the public registry of commerce, in order to allow creditors to judicially oppose the transaction (eg, mergers or spin-offs). See question 4.


What documentation is required in a corporate reorganisation?

The documentation required will depend on the structure of the corporate reorganisation. An analysis should be conducted case by case to ensure that all documents required for a particular structure are duly covered.

If structured through a stock purchase, the documents required will typically include a non-binding term sheet (or binding term sheet if so agreed by the parties), a stock purchase agreement, disclosure schedules, separate non-compete and confidentiality agreements, and, to the extent legally required, filings with the appropriate competent governmental authorities.

If the corporate reorganisation does not involve any third party or there is no change of control among the incumbent shareholders, a simple stock purchase agreement should suffice. In any case, new stock certificates and notations in the company’s books should be executed to ensure that the stock or equity interest transfer is duly recorded by the reorganised company.

If the target is a publicly listed company, the parties will have to prepare a disclosure memorandum that structure and contents should follow the rules set forth in the applicable securities regulations issued by the National Banking and Securities Commission. The disclosure memorandum includes a business overview of the target, information on the buyer and seller, risk factors, the management’s discussion and analysis, and pro forma financial information of the last tax year and the most recent quarterly periods, showing information as if the corporate reorganisation had been completed as of those periods.

A corporate reorganisation where the participating economic agents are members of the same corporate group (with no participation from third parties) would, in principle, be excepted from prior antitrust approval. If the corporate reorganisation needs to be previously authorised by the Federal Antitrust Commission as a result of exceeding the statutory thresholds (or by the Federal Telecommunications Institute if the target is a telecommunications company), the parties should submit a large set of documents, including articles of incorporation, current corporate by-laws, market information, historical audited financial statements, and copies of any transaction documents to effect the reorganisation.

Additional documents will be required if the transaction is being financed, including but not limited to, a loan agreement and applicable security interest agreements. If the transaction is being financed through a capital markets transaction, the parties will have to prepare a prospectus complying with the rules set forth by the National Banking and Securities Commission.

Representations, warranties and indemnities

Should representations, warranties or indemnities be given by the parties in a corporate reorganisation?

A stock purchase agreement in the context of a corporate reorganisation not involving third parties will not typically require the granting of heavy representations and warranties or indemnities among the parties. Basic representations and warranties would typically suffice, such as those related to capacity and authority, corporate organisation, title to shares and corporate records showing valid interest to the shares subject to the reorganisation.

To the extent the buyer is a non-related party, or otherwise, a non-controlling shareholder is intending to acquire control as part of the corporate reorganisation, such buyer or shareholder will typically request the seller and the company for more complex representations, warranties and indemnities.

Assets versus going concern

Does it make any difference whether assets or a business as a going concern are transferred?

Parties may elect to effect the corporate reorganisation either as an asset purchase or as a business as a going concern transfer. In the first scenario, the buyer will only acquire certain assets (and if so agreed, liabilities) considered strategic as part of the corporate reorganisation, while in the second scenario, the buyer will acquire the business as a going concern, typically through the purchase of stock or similar equity securities.

A buyer acquiring a business as a going concern will assume all assets and liabilities of the business (including tax, labour and environmental liabilities, whether disclosed or undisclosed). A buyer not intending to incur the risk of assuming undisclosed liabilities may prefer to conduct the purchase through an asset acquisition.

Tax considerations will be essential to determine whether the best approach should be an asset or a stock acquisition.

Types of entity

Explain any differences between public, private, government or non-profit entities to consider when undertaking a corporate reorganisation.

Publicly listed entities are subject to more stringent rules than private companies, particularly those established by the National Banking and Securities Commission through the Securities Market Law and the Regulations applicable to issuers of the Stock Market. These rules include the need to prepare and publish a disclosure memorandum similar to a prospectus, or the need to conduct a tender offer if the purchase involves 30 per cent or more of the stock of the target.

The acquisition of private companies is typically subject to less stringent statutory requirements than those imposed on publicly listed companies. Generally, the parties will have to comply with basic statutory requirements to complete the reorganisation, depending on the type of structure elected by the parties (eg, merger, spin-off or stock purchase).

Other types of entities may be reorganised or acquired, and a case-by-case analysis should be made to verify whether particular requirements should be met.

In any case, regardless of the type of entity being acquired, to the extent that the transaction or the size of the parties exceed the thresholds set forth in the Federal Antitrust Law (or otherwise the transaction does not qualify as a corporate reorganisation exception for antitrust purposes), the parties should obtain the previous authorisation from the Federal Antitrust Commission.

Post-reorganisation steps

Do any filings or other post-reorganisation steps need to be taken after the corporate reorganisation takes place?

Post-completion filings will depend on the type of structure elected to perform the corporate reorganisation. As discussed above, a merger or spin-off will have to be recorded at the public registry of commerce to allow for judicial opposition by creditors or dissenting shareholders. Also, filings with the competent tax authorities may be required depending on the type of reorganisation conducted (eg, mergers or spin-offs). The Mexican Social Security Institute should be informed of any corporate reorganisation involving an employer substitution in order to update the appropriate social security records of all transferred employees. Finally, if the reorganisation involves any transfer of intellectual property rights (such as trademarks, patents or similar) the parties should give notice to the Mexican Institute of Industrial Property.