Mexico City, May 3rd, 2023.- On April 28, 2023, the Mexican Senate approved a proposal that amends, adds and abolishes several provisions of the Mexican Securities Market Law (Ley del Mercado de Valores) («LMV») and the Mexican Investment Funds Law (Ley de Fondos de Inversion) («LFI»), to seek alternatives for the participation of small and medium businesses in the stock markets, which in turn would allow them to be a source of accessible financing (the “Initiative”).

Securities Market Law

Through the Initiative, the LMV seeks to eliminate the high monetary and regulatory costs of listing an entity in the stock market, as well as the operating costs, the time required to authorize public offerings, the resistance of the owners to relinquish control of the companies, and the low interest of Mexican investors in investing. The most relevant changes, among others, are detailed below:

Simplified Regime for Registration of Securities

· Creation of a new simplified securities registration regime that allows small and medium-sized companies to participate in the stock market through public offerings of securities (debt or equity) in order to obtain the necessary financing and boost their growth.

· Allow the National Banking and Securities Commission (Comision Nacional Bancaria y de Valores) («CNBV») to determine the necessary characteristics that the companies must meet in order to participate in such procedure through the issuance of general provisions.

· Brokerage firms will be responsible for participating in the structuring of the operations of companies that intend to become simplified issuers.

· Establish limits defined by the CNBV for issuances that may be made by simplified issuers.

Amendments to the Security Market Companies Regime

· Strengthen the autonomy of the shareholders’ by amending the issuance, transfer and scope of the share certificates and certain restrictions currently in force.

· Eliminate the obligation to become a Publicly Traded Company (Sociedad Anonima Bursatil) («SAB») within 10 years or when stockholders’ equity exceeds 250 million investment units (approximately MXN946 million (USD 50.5 million)).

· The shareholders’ meeting may delegate to the board of directors the power to increase the capital stock, as well as to determine the terms of the share subscription, including the exclusion of the preemptive subscription right.

· Make regulatory adjustments in line with the general principles of Corporate Governance of the OECD and the G20.

Strenghtening the Principle of Disclosure

· Strengthen the principle of disclosure to clearly identify the inherent responsibility of each of the participants in the transactions carried out in the stock market.

Hostile Takeover Protection Clauses

· Establish new measures to prevent the undesired acquisition of shares to transfer control of the company to third parties; the quorum allowed for voting against at shareholders’ meetings is modified from 5% to 20%.

Investment Funds Law

On the other hand, the Initiative seeks to expand the investment mechanisms within the LFI.

The most relevant changes are detailed below:

· Modify the concept of limited purpose investment funds by incorporating the concept of hedge funds and regulate them with minimum requirements.

· That hedge funds may operate with any Asset Subject to Investment, provided that they define it in their prospectus of information to potential investors.

· Investments made in hedge funds must be subject to the regime established by the CNBV through general provisions.

· In order to have a transparent valuation process for hedge funds, it is foreseen that such funds may hire a price provider—a legal entity independent from the investment funds and founding partners, whose only activity is to value the instruments that make up their portfolios and in the special case that their assets are not securities or stock market securities.

The lawyers of the Banking and Financial Practice are at your disposal to resolve any doubts regarding the above.

S I N C E R E L Y,

Miguel Ángel Peralta García

Pedro Said Nader

Valeria Couttolenc Riba