Contributed By Holland & Knight
Mexico currently has two exchanges (the "Exchanges"): (i) Bolsa Mexicana de Valores, S.A.B. de C.V. (“BMV”) and (ii) Bolsa Institucional de Valores, S.A. de C.V. (“BIVA”). Additionally, Mexico has an International Quotation System (Sistema Internacional de Cotizaciones), which is an electronic quotation to trade shares listed on foreign stock exchanges.
There are different segments within the exchanges, which correspond to the types of securities to be traded in such exchanges. Depending on the type of security, different rules and governance requirements apply to the issuers and sponsors.
There are no debt indices in Mexico.
The main regulatory body is the Mexican National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores) (“CNBV”). In addition, other non-governmental and self-regulated entities are involved in the listing process, like the Exchanges (BMV or BIVA) and a regulated securities deposit and clearing institution (currently only the S.D. Indeval Institución para el Depósito de Valores, S.A. de C.V.).
The CNBV has the remit of supervising and regulating (within the limits of its powers) the entities that are part of the Mexican financial system, in order to procure its stability and correct operation, as well as maintaining and promoting the healthy and balanced development of said system as a whole, with the aim of protecting the interests of the public.
For the CNBV to supervise and regulate properly the entities that are part of the securities market in Mexico, specifically those entities involved in a securities listing or public offering process, the Securities Market Law requires that the securities subject to public offer and intermediation in the securities market be registered at the National Securities Registry (“Registro Nacional de Valores”) (“RNV”), a registry in charge of the CNBV.
The CNBV has the power to authorise the registration of such securities at the RNV for the securities to be listed in the exchanges and, for that purpose, it verifies the compliance of the issuer with the legal framework set forth to protect the interest of the investors, mainly to comply with the full disclosure principles adopted by the International Organization of Securities Commissions (“IOSCO”). Additionally, for the listed securities to be publicly offered, the CNBV has to authorise its public offering as well as the offering documents (prospectus, public offering notice and others) once such documents meet the legal requirements and criteria established in the Securities Market Law and the “General regulations applicable to issuers of securities and other participants of exchange markets”.
The Exchanges, on the other hand, have the purpose of providing access to the listing of securities in the respective trading systems. Additionally, the Exchanges have the purpose of establishing the standards and schemes, both operational and behavioural, tending to promote the fair and equitable development of the securities market and its participants, as well as contribute to its integrity and transparency.
The applications filed before the CNBV and any Mexican stock exchange in any of the three mentioned processes are very similar and could be carried out simultaneously.
Standalone Debt Offering
In connection with the establishment of a standalone debt offering, different application requests have to be filed before the CNBV and the corresponding Mexican stock exchange. Issuers must make a request to the CNBV for: (i) the registration of the debt securities at the RNV, (ii) the authorisation for the public offering of such securities, and (ii) the authorisation of the offering documents, ie, prospectus and key information for investment memorandum (Documento con Información Clave para la Inversión) (“DICI”). Regarding the Mexican stock exchange's application, it is a simple form – mostly check the boxes that apply – which needs to be filled out with general information about the security being offered.
Debt Issuance Programme
In connection with the establishment of a debt issuance programme, different application requests also need to be filed separately before the CNBV and the corresponding Mexican stock exchange. Issuers must make a request to the CNBV for: (i) the preventive registration of securities to be placed under a debt issuance programme, (ii) the authorisation for the public offering of the securities under such debt issuance programme, and (iii) the authorisation of the prospectus of the programme. The preventive registration of the securities would allow issuers to issue and place a specific kind of debt securities, successively during a five-year period.
Additionally, issuers that have complied with the following obligations during the last two years are entitled to make a request to the CNBV for the implementation of a debt issuance programme as a "Frequent Issuer", which implies the authorisation of the offering document forms (templates) that shall be used for the future offering and placement of securities under such programme, namely, that the issuer:
Issuance of debt under a programme
For a debt issuance under a programme to take place, issuers that already have the programme in place but have not been recognised as Frequent Issuers, must request from the CNBV (i) the authorisation of the offering documents (issuance supplement, DICI and notice of public offering) and (ii) the registry number of the issuance at the RNV. There is no need to request the authorisation to offer the securities publicly, as such authorisation is given when the issuance programme is authorised by the CNBV.
Frequent Issuers do not require further authorisation from the CNBV in order to make an issuance under the debt securities programme. However, notice of an issuance should be given to the CNBV to verify that the offering documents do not deviate from the authorised forms. The CNBV may give feedback and validate the issuing documents by issuing an official document confirming the registry number of the issuance at the RNV.
The key legislative instruments which govern debt listings in Mexico are:
There are no specific eligibility requirements such as size of the company, value or any in connection with a sector. The exchange would generally authorise the listing of any company that meets the requirements provided by law and regulations issued by the CNBV for companies willing to list debt in any of the above-mentioned stock exchanges, and do not need to be incorporated as a specific form of entity. However, they must adopt corporate governance principles in accordance with applicable securities regulations.
The companies must be validly incorporated under applicable Mexican law.
No minimum rating for securities listed on the exchange is required. However, the rating will mostly determine the success of the placement. Under Mexican law, issuers must file two different ratings from two different rating agencies.
Audited financial statements for the past three years or from the date of incorporation of the issuer (if such incorporation has less than three years), including the external auditor's favourable opinion to said financial statements.
In the case of a debt offer with a term equal to or less than one year, audited financial statements for the last year must be submitted (which must compare such year's information with the previous year).
Debt securities can be issued in Mexican pesos (“MXN”), US dollars or Investment Units.
There are no requirements regarding local currency issuances or offerings to local investors.
The eligibility requirements for issuers wishing to set up a debt issuance programme do not differ from those required for a standalone listing.
However, issuers wishing to implement an issuance programme as a Frequent Issuer must comply with the obligations set forth in item 1.2 Application Process.
To be listed on a Mexican stock exchange, the main steps are as follows:
The procedure must be exactly the same for companies incorporated in a foreign jurisdiction. The only difference may be that all the filed documents must be translated into Spanish by an authorised expert translator.
The requirements and estimated response times are the same for a debut issuer or a previous issuer. The only difference that could exist is in regard to certain issuer's documents, such as the articles of incorporation and power of attorney, among others, that usually do not need to be filed again for a previous issuer.
The main ways to structure an IPO are through: (i) direct offering of the company's debt securities in the primary market, or (ii) through a special vehicle such as a Mexican trust issuing trust certificates (certificados bursátiles fiduciarios).
Additionally, in connection with structured vehicles, there is an undefined possibility to structure an IPO, depending on the objective of the transaction.
Furthermore, IPOs can be structured depending on the type of investor to which such offering is addressed (limited offerings).
Generally, there are no different or additional procedures for listing different types of debt securities.
In general, it is the same procedure as a request for a standalone issuance of securities. However, issuers must additionally make a request to the CNBV regarding the preventive registration at the RNV of debt securities under an issuance programme. The preventive registration of the securities would allow issuers to issue and place a specific kind of debt securities successively during a five-year period.
Prior to any offering under the programme, the issuer must make a request to the CNBV for authorisation of each of the offering documents, but instead of a prospectus, the issuer must file a supplement.
The issuer also may apply to be considered as a Frequent Issuer and must additionally file all the offering document forms for approval (supplement to the prospectus, notice of public offering and key information for investment memorandum). By doing this, it is not necessary for the issuer to request the offering document authorisation on each future offering, which usually expedites the offerings under the programme.
Advisers appointed in connection with the issuance and listing of debt securities are:
If applicable, common representative of the holders of the debt securities.
Although it is not an adviser per se, it is important to mention the participation of:
Regardless of whether it is a debut issuance/listing, an offer made by a foreign company or a issuance under an existing programme, the roles played by the advisers in each of the modalities mentioned, are the same.
All long-term debt offerings under applicable laws and regulations require a prospectus or offering document. When issued under an existing debt issuance programme, the prospectus is amended by a supplement to the prospectus providing details of the offer.
The exception to the above-mentioned are short-term standalone debt issuances which do not require the submission of a prospectus.
A prospectus must include all material information from the issuer or assets, depending on the type of security. Such information can be summarised as:
I. GENERAL INFORMATION
a. Glossary of terms and definitions.
b. Executive summary.
c. Risk factors.
d. Other values.
e. Public documents.
II. THE OFFER
a. Characteristics of the securities.
b. Destination of the funds.
c. Underwriter’s placement plans.
d. Expenses related to the offer.
e. Capital structure after the offer.
f. Attributions of the common representative (representante común) (only if applicable).
g. Names of persons with relevant participation in the offer.
h. Securities market information.
i. Market maker (formador de mercado).
III. THE ISSUER
a. History and development of the issuer
b. Business description
i. Main activity.
ii. Distribution channels.
iii. Patents, licenses, trademarks and other contracts.
iv. Main customers.
v. Applicable legislation and tax situation.
vi. Human resources.
vii. Environmental performance.
viii. Market information.
ix. Corporate structure.
x. Description of the main assets.
xi. Judicial, administrative or arbitration processes.
In the case of foreign issuers, additionally:
xii. Exchange controls and other limitations that affect the shareholders.
IV. FINANCIAL INFORMATION
a. Selected financial information.
b. Financial information by business, geographical area and export sales.
c. Summary of relevant credits.
d. Administrator’sManagement’s comments and analysis of the operation results and the issuer's financial.
i. Operation results.
ii. Financial situation, liquidity and capital resources.
iii. Internal controls.
iv. Critical accounting estimates, provisions or critical book reserves.
a. External auditors.
b. Operations with related parties and conflicts of interest.
c. Administrators and shareholders.
d. Bylaws and other agreements.
VI. UNDERLYING ASSETS (only for structured securities issuers)
a. Description of the underlying assets.
b. Historical behaviour of the underlying assets.
c. Exercises to quantify the possible returns or losses that under different scenarios could be generated.
VII. RESPONSIBLE PERSONS
a. Financial statements and audit committee's opinions and, if applicable, the commissioner's report.
b. Legal opinion
c. Rating issued by a rating agency related to offer or the implementation of the programme.
(c) What main categories of information or disclosure are included?
(i) General Information
(a) Risk factors
(b) Securities market information
(ii) General characteristics of the offer or programme, as the case may be.
(c) Use of proceeds
(iii) General information of the Issuer.
(a) Financial information
(b) Operational history
(c) Corporate governance
(d) Principal shareholders
The following participants are liable for the contents provided within the scope of their duties:
The requirements are the same in both stock exchanges (BIVA and BMV). Only the corresponding application form varies from one exchange to another, but the information requested is basically the same.
Considering that, in a wholesale issuance, securities are exclusively placed among institutional or qualified investors, the offering can be carried out privately without having to register the securities at the RNV, and consequently no specific content requirement is needed for the offering documents, whereas, in a retail issuance, the offering documents require the disclosure of the information provided in item 6(b) above.
In accordance with the “General regulations applicable to issuers of securities and other participants of exchange markets” a preliminary version of the prospectus is attached to the first filing, and the preliminary prospectus is complemented through subsequent filings both with the comments/requirements from the CNBV, the Exchanges and from the transaction parties.
Prior to obtaining the authorisation, a preliminary prospectus signed by the parties mentioned in item 6.1(d) above and initialled by the issuer's legal representative is submitted to the CNBV. Once the authorisation is obtained, two copies of the definitive prospectus (signed and initialled just as mentioned above) with all of the exhibits, is normally submitted to the CNBV.
The “General regulations applicable to issuers of securities and other participants of exchange markets” establishes that, depending on whether it is a long-term issuance or a short-term issuance, both the prospectus and any other offering documents must be available for public investors, in accordance with the following:
Issuers performing an issuance on a date close to or after the publication of periodic financial information in terms of the Title IV of the “General regulations applicable to issuers of securities and other participants of exchange markets” should consider the following:
Additionally, in the case that the pricing or closing date occurs within five and ten business days prior to the publication of the issuer's financial information, the issuer must disclose in the offering documents (public offer notice, prospectus and/or supplement, as the case may be) the date on which the financial information will be published, the expected tendency regarding the historical information, and if possible, the financial information of the latest available monthly period.
Under an issuance programme, issuers are able to offer and place securities publicly without having to submit a new prospectus or even update the prospectus of the issuance programme, as long as the issuer complies with its reporting obligations under the “General regulations applicable to issuers of securities and other participants of exchange markets”.
Additionally, short-term standalone debt issuances do not require the submission of a prospectus.
Restrictions to market the securities are applicable in Mexico before the issuance documents (specially offering document or prospectus) are publicly available. Under applicable law, an issuer may file issuance documents with the authorities as confidential, meaning such documents will be available to the public until (i) the issuer requests them to be publicly available, or (ii) upon the CNBV (as authority) and the Exchanges (as self-regulatory institutions) request.
Once the offering documents are available to the public through the securities exchange and CNBV's platforms, issuers are allowed to market and offer the securities freely.
A book-building process is commonly used for debt offerings in Mexico.
Currently, the most common manner to structure a debt offering is through best efforts. Mexican underwriters will rarely commit to firm commitment.
The key terms of an underwriting agreement are:
Stabilisation in connection with a debt offering allows the underwriters to purchase and sell the publicly offered securities in the open market. Stabilising transactions consist of certain bids or purchases of securities made for the purpose of preventing artificial declining in the market price of the securities after the offer is made. Any stabilisation activity cannot consist in manipulating the market as manipulation is against best practices and enforced by the CNBV.
Public offers in Mexico are governed by Mexican law. In the case of foreign issuers conducting a public offering in Mexico, Mexican law would apply but formation documents and other items related to the issuer’s operations might be governed by any foreign law.
There are no cases of securities governed by Mexican law to have a conflict of laws.
A judgment rendered in a foreign jurisdiction would be enforceable in the competent courts of Mexico pursuant to Article 1347-A of the Commerce Code, which provides, inter alia, that any judgment rendered outside Mexico may be enforced by Mexican courts, provided that:
Regarding arbitrations awards, Mexico is part of the New York Convention (the Convention on the Recognition and Enforcement of Foreign Arbitral Awards), and the Mexican Commerce Code reinforces the principles of recognition and enforceability of foreign arbitration awards. The only exceptions to its enforcement are listed in Article 1461 of said Commerce Code and are customary exceptions (ie, if the award has been declared null or is not enforceable under the legislation where the award was rendered, one of the parties was not properly notified of the arbitration proceedings, etc).
Other than those described above for foreign judgements, and with regard to arbitration awards, the only requirements are also established in Article 1461 of the Mexican Commerce Code, in general terms: (i) submitting a written request to the Mexican judge for its recognition; (ii) the party requesting its execution should submit the original of the award duly authenticated or a certified copy, along with the original arbitration agreement, or a certified copy; and (iii) if the award or agreement is not written in Spanish, a translation into Spanish made by an official expert should also be submitted.
In accordance with Mexican law, the most common ways to perfect a security over assets are:
The enforceability of any of the transaction documents would not be affected in general terms.
Foreign entities wishing to offer their bonds in Mexico must file before the CNBV the corresponding application requesting the registration of the securities at the RNV. Additionally, a listing application must be filed before the Mexican stock exchange.
Once the securities are registered and listed in accordance with the above-mentioned, the foreign issuer is compelled to comply with the continuous reporting obligations set forth in the “General regulations applicable to issuers of securities and other participants of exchange markets”.
A typical timetable is as follows:
The CNBV takes more time to analyse documents from first-time issuers (such as IPOs), as they have no background concerning the company’s financial information or market behaviour. Subsequent offerings usually take less time than IPOs.
Subsequent offerings (repeat standalone issuances)
Subsequent offerings (repeat standalone issuances) usually take less time than IPOs, since the offering documents contain the same information as the initial ones, and only information about the additional debt securities is added. However, the time difference is usually not that significant.
Issuances under a programme
Issuances under a programme that is already in place usually take less time since a prospectus is not needed; however, the supplement to the prospectus, the public offer notice and the key information for investment memorandum need to be authorised by the CNBV.
Issuances made by Frequent Issuers are faster because, as mentioned before, all the offering document forms have been pre-authorised by the CNBV.
Frequent Issuers do not require further authorisation from the CNBV in order to make an issuance under the debt securities programme. However, notice of an issuance should be given to the CNBV to verify that the offering documents do not deviate from the authorised forms. In this case, the offering documents must be available at least two business days before the pricing or closing day.
Differences in timing between retail and wholesale offerings
Considering that, in a wholesale issuance, securities are privately offered and do not need to be registered at the RNV, the offering process is considerably shorter than the offering process of a retail issuance.
Debt securities are cleared and settled through the securities deposit institution. Currently in Mexico only one exists: S.D. Indeval Institución para el Depósito de Valores, S.A. de C.V., which carries out the book-building closing then the positions are made on the settlement and crossing date, when the certificates are assigned.
There are no differences in clearing and settling securities issued in a currency other than the local currency.
The main tax issues for issuers consist of structuring the issuance and the nature of the debt securities in compliance with all tax legal requirements that would allow the issuer and debt-interest holders to have access to more beneficial withholding tax rates.
Close attention also should be placed on whether a security qualifies as debt or equity since tax liabilities differ between interest payments and equity or equity-like distributions.
Generally, interest paid by Mexican financial institutions to Mexican tax residents is subject to a 0.46% WHT applicable over the capital amount generating the interest income. The WHT rate is determined annually. The WHT is creditable against the recipient's income tax liability.
Interest paid by Mexican entities, different from financial institutions, to Mexican tax resident individuals, and derived from securities not traded in the authorised Mexican stock markets, are subject to a 20% WHT rate on the nominal interest. Such WHT is creditable against the recipient's income tax liability under certain circumstances.
Interest paid to foreign tax residents are subject to different WHT rates depending on the type of interest and the nature of the foreign beneficiary.
i) Interest paid to a foreign financial institution, investment banks or non-bank bank, if they are the beneficial owners of the interest and are residents of a country with which Mexico has an Income Tax Treaty for the Avoidance of Double Taxation ("Tax Treaty") in force and the requirements set forth in the corresponding Tax Treaty are complied with.
ii) Interest from certificates, negotiable instruments, loans or credits owed by Mexican financial institutions.
iii) Interest derived from publicly traded debt securities in Mexico and from debt securities traded abroad through banks or stockbroker firms that are located in a country with which Mexico has a Tax Treaty, under certain circumstances.
iv) Interest paid to foreign financing institutions in which the Federal Government, through the Ministry of Finance and Public Credit, or the Central Bank, owns a percentage of their equity capital, as long as they are the beneficial owners of the interest.
i) Interest paid to foreign financial institutions, including investments banks and non-bank banks, when they are not residing in a country with which Mexico has a Tax Treaty, as long as they are the effective beneficiaries of the interests.
ii) Interest paid to entities that raise capital by issuing publicly traded debt securities abroad and invest such capital in Mexico.
iii) Interest derived from securities publicly traded through banks and stockbroker firms in a country with which Mexico does not have a Tax Treaty, provided certain requirements are met.
i) To interests paid to reinsurance companies.
i) Interest paid to foreign suppliers that financed the acquisition of machinery or equipment.
ii) Interest paid by financial institutions to foreign residents, other than those indicated above.
Depending on the country of residence of the recipient, the WHT may be reduced or eliminated through the application of a Tax Treaty.
Certain interest payments are exempt from WHT, eg, interests derived by non-resident pension funds, provided reciprocal treatment and other conditions are fulfilled.
Payments of principal are tax-exempt.
LPNs and guaranteed offshore SPV structures shall be reviewed on a case-by-case basis.
The issuance of any listed or unlisted debt securities is not subject to any tax or duties in Mexico.
Any profit derived from transfers of publicly traded bonds is treated as interest and subject to income tax in Mexico. Profits obtained on transfers of private bonds, eg, traded over-the-counter or otherwise, are deemed to be gains derived from the disposition of movable property, as opposed to interest.
Similarly, transfers of publicly traded bonds are value-added tax ("VAT") free, while transfers of private bonds are generally a VAT-taxable event. The VAT rate is 16%.
Generally, gains derived from the disposition by a foreign resident-holder to another of bonds issued by a Mexican resident are not subject to tax in Mexico. In contrast, any profit resulting from a bond disposition made by a foreign resident-holder to a Mexican resident purchaser will be subject to a WHT in Mexico.
Any purchase of bonds at a discount by a foreign resident-holder will be treated as interest income, subject to tax in Mexico, if the seller is a Mexican resident.
The applicable rate will depend on the effective beneficiary of such profits pursuant to the rules described in 1.2 Rules or Governance Requirements, eg, interests derived from the sale of bonds traded in authorised Mexican stock markets by a foreign resident will be subject to a 4.9% WHT in Mexico.
An applicable Tax Treaty may provide for any reduction of any of the above-mentioned domestic applicable rates.
In the case of listed debt securities, the tax could be collected via the custodian at the moment of transfer under certain circumstances, or via the financial intermediary, under others.
Reporting (financial or otherwise) obligations
The issuers must provide quarterly and annual reports.
Within 20 business days following the end of each of the first quarters of the fiscal year, and within 40 working days following the end of the fourth quarter, the issuer must make public, through the CNBV and the Exchange, the financial statements, as well as the economic, accounting and administrative information comparing at least the figures of the quarter in question with the financial statements of the previous year in accordance with the applicable accounting regulations. The quarterly report must contain an update of the annual report or the prospectus of placement in case that, at the date of presentation of disclosure of the aforementioned financial information, the issuer will not have the obligation to publish said report regarding the comments and analysis of the administration on the operation results and financial status.
No later than April 30th of each year, the issuer must make public, through the CNBV and the Exchange, an annual report corresponding to the previous year that includes the annual audited financial statements of the reported year as well as the operating and administrative information of the issuer for the reported year.
For some types of securities, issuers must provide monthly reports in accordance with the “General regulations applicable to issuers of securities and other participants of exchange markets”.
Disclosure requirements in respect of information regarding the issuer
The disclosure of periodic information is considered relevant information as well as any change to the structure or characteristics of the securities. Issuers are required to disclose any information that may affect the price of the securities, such as: (i) unusual changes in the market price or volume of operation of its securities and (ii) changes in the supply or demand of its securities or in their price which are not consistent with their historical behaviour and cannot be explained by the public information.
Also the following should be considered relevant events enunciatively but not limited to the following:
i) more than 10% of the assets, rights or securities has four or more past due and unpaid monthly instalments over a period;
ii) more than 10% of the unpaid balance of the principal of the trust credit rights are paid early in a period;
iii) regarding an assignment agreement, the assignor reacquires or replaces 10% or more of such assets, rights or trust securities. Also, if derived from such reacquisition, more than 25% of all assets that comprise the trust property is concentrated in a geographical area;
iv) if more than 5% of the total of assets, rights or trust securities are in judicial, administrative or arbitration proceedings.
To determine if an event is relevant, the issuer must consider if the event in question is equivalent in value to 5% or more of the its assets, liabilities or consolidated capital, or amount to 3% of the consolidated total sales of its previous year.
Corporate governance requirements
Only those disclosed in the documents from the IPO or any changes thereto.
Specific rules applying to transactions post-listing.
The Securities Market Law provides, depending on the transaction, specific rules for both the board of directors and the shareholders meeting as follows:
Board of Directors
The board of directors must approve prior opinion of the practices committee:
i) due to their amount, lack of relevance.
ii) are carried out between the company and/or its subsidiaries and/or those in which the company has significant influence, or between any of these, as long as:
a) they are considered as ordinary or habitual business activity,
b) they are considered made at market prices or supported by valuations made by external experts.
c) are carried out with the company's employees, as long as they are carried out under the same conditions as with any client or as a result of labour benefits of general nature;
d) are carried out with related parties in connection with loans, any type of credit or guarantee.
The shareholders' meeting, in addition to the provisions of the General Business Company Law (Ley General de Sociedades Mercantiles) will take place in order to approve operations in which the company or its subsidiaries intend to execute, during a fiscal year, when said operations represent 20% or more of the consolidated assets of the company based on figures corresponding to the close of the immediately preceding quarter, regardless of the way in which they are executed, whether simultaneous or successive, but due to their characteristics may be considered as a single operation.
There are no differences in connection with the continuing requirements between retail and wholesale debt securities offers.
These obligations all apply to foreign incorporated issuers.
Penalties include fines ranging from approximately MXN806,000 to MXN8,060,000 and are independent of any damages.
In addition, a trading halt or the cancellation of the registration of the securities in the RNV can be granted by the CNBV as these are considered serious infringements.
The head of finance and legal counsel or equivalent that do not comply with their obligations to review within their respective competences and sign quarterly and annual reports will be sanctioned with an administrative fine imposed by the CNBV of 10,000 to 100,000 days of salary under the LMV equivalent to MXN806,000 to MXN8,060,000 (per rate MXN80.60 Unit of Measurement and Update (“UMA”) is the economic reference in pesos to determine the amount of payment from obligations and alleged assumptions provided for in federal law, the states and Mexico City, as well as in legal provisions from all of the above). The chairmen or women of the committees of corporate practices or auditing of SABs, which fail to prepare the annual report on their activities and present it to the board of directors of the company, will be liable for a fine of 20,000 to 100,000 UMAs under LMV, equivalent to MXN1,612,000 to MXN8,060,000.
Issuers that fail to provide the CNBV or the stock exchange in which they list their securities the quarterly or annual reports, or when they submit them incomplete or without complying with the requirements, terms or conditions required for it, similarly, to the issuers that fail to prepare their financial statements in accordance with accounting principles issued or recognised by the CNBV, will receive a fine of 30,000 to 100,000 UMAs under LMV, equivalent to MXN2,418,000 to MXN8,060,000.
These sanctions might be applicable for SABs, shareholders, members and the secretary of the board of directors and relevant executives, and will be equally applicable to SAPIB, FIBRAs, and CKDss, shareholders and other persons performing any of the aforementioned positions when the legal precepts are applicable to them.
Violation of these provisions will be considered serious infringements and the fines referred previously are independent of the suspensions, disqualifications, cancellations, interventions and revocations that may be appropriate.
Regardless of the economic sanctions that, pursuant to the applicable law, the CNBV imposes on the issuers for violating these provisions for not preparing their financial statements in accordance with accounting principles issued or recognised by it, the CNBV will require the issuers to modify their financial statements in order to comply with the aforementioned principles and its disclosure to the public.