MEXICO Law and Practice Contributed by: Allan Kaye Trueba, Rebeca Sánchez and Mariana Santillán, Aziz & Kaye Business Law
• the Federal Law for the Prevention and Identifica - tion of Illicitly Funded Transactions; • the Regulations to the Federal Law for the Preven - tion and Identification of Illicitly Funded Transac - tions; and • the General Rules issued by the Tax Administration Service. The AML Regulations provide the framework appli - cable to individuals and entities (including financial institutions) that carry out economic transactions in Mexico that are deemed prone to illicit funding or to financing organised crime or terrorism. Said eco - nomic transactions are therefore considered vulner - able activities. The Ministry of Finance and Public Credit is the main authority in charge of overseeing and enforcing the AML Regulations. However, depending on the specific nature of each vulnerable activity, it may be subject to additional regulations and oversight from other authorities. 3.3 Sanctions, National Security and Foreign Investment Controls There are no restrictions on co-operating with JV part - ners in Mexico as a consequence of sanctions laws, nor are there any specific national security regulations or considerations that apply to the formation of a JV in Mexico. For corporate JVs, restrictions may apply regarding foreign participation in the company’s capital stock, depending on the company’s activities. Mexico’s Foreign Investment Law sets out three categories of restrictions: activities reserved exclusively to the state, activities reserved exclusively to Mexican individu - als or Mexican companies with a foreign investment exclusion clause, and activities with specific limits on foreign ownership, ranging from 10% to 49%. Additionally, foreign investors are required to obtain approval from the National Commission of Foreign Investments to hold, directly or indirectly, more than 49% of a company’s capital stock if the company’s assets exceed a value set annually by the author - ity. The recent threshold was set at approximately
USD1.59 billion (using an exchange rate of MXN18 to USD1). 3.4 Competition Law and Antitrust The main regulator for antitrust matters in Mexico is the newly created National Antitrust Commission (NAC or “the Commission”) which replaced the Fed - eral Economic Competition Commission (FECC) and the Federal Telecommunications Institute. Under the recently amended Federal Economic Com - petition Law (FECL), the following practices are pro - hibited: monopolies, monopolistic practices, unlawful mergers, and barriers that diminish, damage, or hinder competition and free market access. A JV may qualify as a merger under the FECL, which defines a merger as the acquisition of control or any act resulting in the union or combination of com - panies, associations, shares, equity interests, trust rights, or assets between economic agents. The Mexican antitrust authority will not authorise mergers that diminish or damage competition and free market participation for equivalent goods or services. Such mergers may be investigated and sanctioned. According to the current FECL and subject to certain exceptions outlined in the law, mergers exceeding certain thresholds must be notified to the NAC before becoming effective in Mexico. Said thresholds have been reduced in the revised FECL. Nonetheless, economic agents involved in transac - tions that do not meet the newly reduced thresholds may voluntarily notify such mergers to the NAC. It is important to consider that the Commission may inves - tigate transactions in certain cases that do not require prior notification up until three years after their clos - ing. The latter is the case if the NAC considers that there are indications that the transaction may have as its object (purpose) or effect to hinder, reduce, harm, or impede competition or free market access (also defined as unlawful merger). It is worth noting that certain types of transactions may receive different treatment. For example, in the con - text of strategic alliances between airlines, the former
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