MEXICO Law and Practice Contributed by: Carlo Cannizzo, Marco Cannizzo, Stefano Amato, Enrique García and Paloma Iglesias, Cannizzo
4.5 Filing/Reporting Obligations Reporting obligations applicable under Mexican laws are no different in the case of dealings in derivatives. 4.6 Transparency Pursuant to the terms of the General Provisions Appli - cable to Securities Issuers and Other Securities Mar - ket Participants ( Disposiciones de Carácter General Aplicables a las Emisoras de Valores y a Otros Par - ticipantes del Mercado de Valores or the Issuers’ Pro - visions), particularly Exhibit K regarding the instruc - tions for drafting the prospectuses for tender offers, the documents that need to be filed with the CNBV jointly with the application to obtain authorisation for a voluntary or mandatory tender offer must include, among other elements, the intention and justification of the transaction as well as the purposes, plans and consequences of the offer. In order to know the stage when, and the authori - ties before which, a deal must be disclosed, it will be necessary to consider the type of industry involved as well as to determine whether it will require authorisa- tion from the CNA. In general terms, the obligation to notify or obtain authorisation from the CNA, if required, must be made before the consummation of the deal. This means any of the following: 5. Negotiation Phase 5.1 Requirement to Disclose a Deal • the relevant legal act giving rise to the transaction has been perfected in accordance with applicable law (which may include, among other elements, the execution of a binding agreement and/or the satis - faction of any applicable conditions precedent, but is not limited thereto); • effective control over an entity has been obtained, whether directly or indirectly; • a binding agreement giving rise to the concentra - tion has been executed; or • in the case of staged or multi-step transactions, the final step has been taken that results in the applicable notification thresholds being exceeded.
If the notice is submitted later, it is considered untime - ly and may result in sanctions, in addition to any appli - cable administrative, civil and criminal liability of the economic agents and of the persons who ordered or assisted in the execution. In the case of deals involving public companies, addi - tional disclosure obligations may apply under securi - ties regulations. Thus, for example, as indicated in 4.2 Material Shareholding Disclosure Threshold , the dis- closure of an acquisition of certain percentages must be made no later than the business day following the closing of the deal. On the other hand, in terms of the provisions of Mexican stock exchange legislation, issuers must disclose through the stock exchange where their securities are listed, for immediate dis - semination to the public, the relevant events defined by the law itself at the time they become aware of them together with all the relevant information in con - nection with such events. For private companies, the obligation to file notice of the execution of a deal to the Ministry of Economy, in terms of the provisions of the LGSM, and to the tax authority ( Servicio de Administración Tributaria or SAT), in accordance with Article 27 of the Federal Tax Code, arises once the deal has been closed. 5.2 Market Practice on Timing Market practices regarding disclosure do not usually In the case of business combinations, the practice is for a complete and thorough due diligence to be performed, as in other acquisitions. The scope of due diligence varies depending on the nature of the target company, industry, regulations, deal structure, location of the business and potential risks. Given that Mexico operates under a federal system, due diligence processes should cover federal, state and municipal compliance. A due diligence process gener - ally covers the following key areas. 1. Corporate and Legal Due Diligence • Review of the company’s corporate structure, by-laws and shareholder agreements to ensure differ from legal requirements. 5.3 Scope of Due Diligence
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