Disclosure Requirements - Mexico

19.07.2012

Disclosure Category: 3

Background and legal basis

CBL has no obligation to disclose the holdings or other information about its customers. However, beneficial owners are required by law to disclose the following:

  • Their holdings when they pass certain threshold
    The beneficial owner is required to monitor the disclosure threshold and effect the necessary regulatory reporting.
    N.B.: There is no disclosure requirement for intermediaries holding securities on behalf of third parties; the requirement applies only to the beneficial owner of the securities.
  • Their identity for tax purposes
    The Mexican income tax law1, along with international tax treaties, establishes rates based on the nature of the financial agreement and the status of the recipient of the interest.
    The assets held in CBL's account are treated for tax purposes as belonging to non-residents of Mexico, regardless of the actual residency of the CBL customers. Mexican resident beneficial owners are subject to a 0.6% tax on the amount invested in government fixed income securities. However, CBL as intermediary has no obligation to disclose the identity of Mexican resident beneficial owners; this obligation falls under the responsibility of those beneficial owners themselves.

Obligation to report threshold crossings

There are two primary rules governing shareholder disclosure in the Mexican market:

  • A general rule applicable to all companies; and
  • A specific rule applicable to financial institutions.

Note: These rules are not mutually exclusive, as different regulatory bodies require a reporting in each case. In all cases, the beneficial owner is required to monitor the disclosure thresholds and effect the necessary regulatory reporting.

General rule applicable to all companies

1.

According to the Securities Market Law2, shareholders acquiring, in a single act or in multiple acts, through the Bolsa Mexicana de Valores (BMV) or Over-The-Counter (OTC), through one or more transactions, between 10% and 30% of the capital of a listed company in Mexico must disclose this acquisition to the general public through the BMV.

For the purposes of the disclosure requirements, a shareholder can be defined as a single beneficial owner or a group of persons that have agreed to work in concert regarding the company, including persons related by marriage, children or parents and companies forming part of the same consortium. This requirement applies to all listed companies (including financial institutions and brokerage houses).

Additionally, such shareholders must disclose their intention of acquiring or not a significant influence or a controlling interest in the corresponding company.

If the acquisition is carried out by a group of related persons or persons acting in concert, the ownership breakdown of each participant must also be disclosed. There is no specific format or form required for this disclosure. The notice must be in Spanish and sent the next business day following the acquisition and must contain the following information:

  • Legal name of the beneficial owner of the shares;
  • Legal representative of the beneficiary for these purposes;
  • Address for the BMV to send correspondence;
  • Name and stock exchange ticker symbol of the security (including the share series);
  • Total number of shares held by the beneficiary;
  • Tansaction history of how the position was acquired, including date of each purchase and the broker(s) through whom the transactions were executed; and
  • Intention of the purchaser (whether to acquire controlling interest or not).

The notice to the BMV should be sent at the following address:

Subdirector de Adminstración de Valores
Bolsa Mexicana de Valores
Reforma 255, Piso Mezzanine
Colonia Cuauhtemoc
Mexico D.F. 06500
Mexico

Failure to disclose this information is sanctioned by a fine, which can range from 200 to 10,000 days of minimum wage3.

2.

Any person that controls or has a significant influence in the controlling entity, or in the consortium to which a listed company is party, the counsellors or board members of such consortium, or the companies part of such consortium, that directly or indirectly increases or decreases its participation by 5% in the listed company referred to above, must notify the general public of such increase or decrease through the BMV.

Such disclosure must be made on the business day following the increase or decrease. The disclosing party must also disclose its intention of acquiring or not a significant influence or controlling interest in the listed company.

There is no specific format or form required for this disclosure. Shareholders meeting the above-mentioned requirements should contact the BMV directly.

3.

The person or group of persons that owns, directly or indirectly, 10% or more of the capital stock of a listed company and the counsellors and board members of such listed company must disclose to the Comision Nacional Bancaria y de Valores (Mexican Banking and Securities National Commission - CNBV) and, in the cases specified by the CNBV, to the general public through the BMV, the purchase or sale of their shares, in accordance with the general rules that the CNBV will issue in this regard.

There is no specific format or form required for this disclosure. Shareholders meeting the above-mentioned requirements should contact the CNBV directly.

Additional specific rule applicable to Mexican financial institutions

According to the Credit Institutions Law4, shareholders acquiring 2% or more of the capital stock of a financial institution are required to notify the CNBV. The notice must be sent within three business days after the acquisition. The penalty for failure to disclose this information is left to the discretion of the CNBV, who can impose a monetary fine, force the sale of the securities or confiscate the securities acquired in excess of the limit.

In addition, when an acquisition or guarantee relates to more than 5% of the ordinary capital stock of a financial institution, special approval of the CNBV and the Mexican Ministry of Finance, Secretaría de Hacienda y Crédito Público (SHCP), hearing the Mexican Central Bank’s opinion, is needed and the person or group of persons that wants to acquire or grant guarantees must comply with additional law requirements established in the Credit Institutions Law (article 10 fraction II) and provide the CNBV with additional information.

In the event that the acquisition by a person or a group of persons (whether shareholders or not) relates to more than 20% of the capital stock and/or control of a financial institution, special approval from the CNBV is needed after hearing of the Mexican Central Bank’s opinion.

Control means the possibility for one individual or group of persons to carry out any of the following actions:

  • Impose, directly or indirectly, decisions in the general meetings of shareholders, partners or equivalent bodies, or appoint or remove the majority of directors, managers or equivalents of a company;
  • Maintain the rights that, directly or indirectly, allow the exercise of a right to vote with regard to more than 50% of the capital stock of a company; or
  • Manage directly or indirectly, the administration strategy.

The notice presented to the CNBV must be in Spanish and must contain the following information:

  • List of the person or group of persons who want to obtain control of the financial institution accompanied by information that proves the compliance with the requirements established in the Credit Institutions Law and any additional information that may be required by the CNBV;
  • List of the directors, managers or equivalent who want to obtain the aforesaid percentage or obtain control, with the information that proves that such persons fulfil the Credit Institutions Law requirements for such positions;
  • Business plan functions, which must comply with the requirements established in the Credit Institutions Law (article 10 fraction IV);
  • Strategic business plan, for the organisation, administration and internal control of the financial institution.

In addition to the aforesaid information, the CNBV is authorised to require additional information.

Special disclosure requirement applicable to holding companies of Mexican financial institutions

According to the Financial Group Law5, shareholders acquiring 2% or more of the capital stock of a holding company of a financial institution are required to notify the SHCP.

The notice, which must be in Spanish, must contain the following information:

  • Legal name of beneficial owner of the shares;
  • Legal representative of the beneficiary for these purposes;
  • Address for SHCP to send correspondence;
  • The name and stock exchange ticker symbol of the security (including the share series);
  • The total number of shares held by the beneficiary;
  • The transaction history of how the position was acquired including date of each purchase and the broker(s) through whom the transactions were executed; and
  • The intention of the purchaser (whether to acquire controlling interest or not).

If the acquisition is carried out by a group of related persons or persons acting in concert, the ownership breakdown of each participant must also be disclosed. There is no specific format or form required for this disclosure.

The notice should be sent to the attention of the Director Adjunto de Banca Multiple at the following address:

Secretaria de Hacienda y Crédito Público
Insurgentes Sur 826, Piso 11
Colonia del Valle
Mexico, D.F. 03100
Mexico.

The notice must be sent within three business days after the acquisition. The penalty for failure to disclose this information is left to the discretion of the SHCP, who can impose a monetary fine, force the sale of the securities, or confiscate the securities acquired in excess of the limit.

There is no requirement to disclose the 2% ownership threshold of a Mexican financial institution to the BMV or to the CNBV. However, any acquisition between 10% and 30% would still be subject to the general disclosure requirements as outlined above.

Special disclosure requirements applicable to the acquisition of stock of brokerage houses.

According to the Securities Market Law, shareholders acquiring 2% or more of the ordinary capital stock of a brokerage house are required to disclose such acquisition to the CNBV within three business days after the acquisition.

If the acquisition is carried out by a group of related persons or persons acting in concert, the ownership breakdown of each participant must also be disclosed. There is no specific format or form required for this disclosure.

The notice should be sent as follows:

Vicepresidencia de Supervisión Bursátil
Comision Nacional Bancaria y de Valores
Insurgentes Sur 1971
Torre Sur, Piso 10
Colonia Guadalupe Inn
Mexico D.F. 01020
Mexico

In cases of the acquisition of 5% or more of the ordinary capital stock of a brokerage house but less than 30%, and in any case without acquiring a controlling interest in the brokerage house, the previous authorisation of the CNBV shall be obtained.

In cases of the acquisition of more than 30% of the ordinary capital stock, a previous authorisation of the CNBV and the consent of the board of governors of such institution shall be obtained.

Failure to comply with these requirements will be sanctioned by a fine, which can range from 3,000 to 20,000 days of minimum wage3.

Tender Offers

Acquiring between 30% and 50%

Shareholders who want to acquire more than 30% but less than 50% of the outstanding capital stock of a listed company in Mexico are required to launch a limited tender offer for the intended percentage or for at least 10% of issuer’s capital, whichever is higher. The offer period must last at least 20 business days.

The tender offer shall include all types or series of shares and the price shall be the same for all types or series of shares. If the number of shares tendered exceeds the intended percentage, the offer will be prorated among all participants.

Acquiring more than 50%

Shareholders who want to acquire more than 50% of the outstanding capital stock of a listed company in Mexico are required, unless an exception is granted, to launch a tender offer for 100% of the outstanding shares of the company. The CNBV may authorise the exception and the request must be accompanied by a favourable opinion of the Board of Directors (Audit Committee) of the company, which must give reasons justifying the request, taking into consideration that shareholders interests will not be affected. The offer period must last at least 20 business days.

The tender offer shall include all types or series of shares and the price shall be the same for all types or series of shares. In the event that the number of shares tendered exceeds the intended percentage, the offer will be prorated among all participants.

Sanctions

Failure to comply with the obligation of making a tender offer or with the requirements established by the Securities Market Law for such tender offer is sanctioned by a fine, which can range from 10,000 to 100,000 days of minimum wage3.

In addition, shareholders acquiring stock without complying with these requirements will not be authorised to exercise corporate and voting rights in connection with such stock.

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1. Ley del Impuesto sobre la renta: (Mexican Tax Law): Nueva Ley publicada en el Diario Oficial de la Federación el 1º de enero de 2002. Última reforma publicada DOF 25-05-2012 (New Law published in the Federal Official Gazette (FOG) on 1 January 2002. Last reform published on the FOG on 25 May 2012.)
2. Ley del Mercado de Valores (Securities Markets Law): Nueva Ley publicada en el Diario Oficial de la Federación el 30 de diciembre de 2005. Última reforma publicada DOF 06-05-2009. (New Law published in the Federal Official Gazette (FOG) on 30 December 2005. Last reform published in the FOG on 06 May 2009.)
3. The minimum wage, starting from 1 January 2011, is MXN 59.82 per day.
4. Ley de Instituciones de Crédito (Credit Institution Law): Nueva Ley publicada en el Diario Oficial de la Federación el 18 de julio de 1990 Última reforma publicada DOF 25-05-2010. (New Law published in the Federal Official Gazette (FOG) on 17 January 1990. Last reform published in the FOG on 25 May 2010.)
5. Ley par Regular Las Agrupaciones Financieras (Financial Group Law): Nueva Ley publicada en el Diario Oficial de la Federación el 18 de julio de 1990. Última reforma publicada D.O.F. 18-07-2006. (New Law published in the Official Gazette on 18 July 1990, last reform published in the Official Gazette on 18 July 2006.)