Table of Contents

• Introduction
• 1) Regulation
• 2) Foreign Investment and National Investment
• 3) Activities Reserved For the State
• 4) Economic activities and Companies Reserved for Mexican Individuals
• 5) Activities with Specific Regulation
• Up to 10%
• Up to 49%
• Up to 49%+
• 6) Acquisition of Real Estate
• A) Acquisition in a Restricted Area
• B) Acquisition in a Non-Restricted Area
• C) Request’s Content
• D) Trusts On Real Estate in Restricted Areas
• E) Content of the Permit’s Request
• F) Special Requirements for Foreign Individuals or Legal Entities
• G) Conditions of Trust Contracts
• H) Duration of the Trust
• I) Resolution to the Request
• 7) Commercial Companies
• 8) Investment of Foreign Companies
• A) Attachments
• B) Resolution
• 9) Neutral Investment
• A) Concept
• B) Neutral Investment in Instruments Issued by Fiduciary Institutions
• C) Neutral Investment Represented by Special Series of Shares
• 10) National Foreign Investment Commission
• A) Integration
• B) Powers
• C) Operation
• D) Requests’ Resolution
• 11) National Registry of Foreign Investments
• A) What Must Be Registered
• B) Information for the Registration of Individuals, Foreign Legal Entities and Mexican Companies
• C) Trust Agreements Registration
• D) Registration Certificates
• E) Intervention of Public Notaries
• F) Annual Renewal
• 12) Sanctions
• A) Violations
• B) Right of Defense

Introduction

Mexico is one of the best places to invest due to its closeness with the US and its natural resources, making it outstanding in this global era. Moreover, Mexico’s Foreign Investment Law is so lenient to investors that it’s considered one of the countries more open to foreign direct investment, although some concerns have arisen from Mexico’s presidential policies.

Notwithstanding the aforementioned, Mexico’s rule of law is staunch and guarantees those who invest in our country. Some exemptions may occur, but all depends on the type of investment foreigners desire to make in Mexico because some activities are reserved for Mexico’s State or its nationals, while others are limited to aliens.

According to Mexico’s Foreign Investment Law and its Regulation of the Foreign Investment Law and the Foreign Investment National Registry (henceforth Mexican Law), there are five branches in which foreigners (individuals and entities) can provide direct investment in Mexico, which are: 1) general provision; 2) on reserved activities; 3) activities under specific regulations; 4) acquisitions of real estate, exploitation of mines, and national territorial waters, and trusts. Finally, 5) neutral investment.

All foregoing branches have special provisions that aliens should be aware of to comply with the government’s policies and resolutions and avoid losing money while planning to invest in Mexico or, worse, forfeiting their expenditures for not complying with Mexican Law. Here, I will highlight those more essential issues you should take care of, but bear in mind that I will only cover some of the hypotheses and problems regarding this topic. Without further ado, let’s start.

Original Language and Source of this Entry

This entry is just a translation of the original one I wrote and published on https://belebalabogados.mx under the title El ABC de la inversión extranjera en México. Therefore, if you have doubts about my translation, please check the source for more information. Keep in mind that English is not my native language, so from now on, I apologize to the reader for any errors or confusion that may arise from this translation.

1) Regulation

Regarding the regulations about foreign investment in Mexico, the basic rules to consider are the Political Constitution of the United Mexican States, the Foreign Investment Law and Regulations of the Foreign Investment Law and the National Registry of Foreign Investments, leaving aside the dispositions in foreign trade, Customs Law, economic law, and other provisions that, in any case, complement the subject of this blog entry.

2) Foreign Investment and National Investment

As a general rule, foreign investment may participate in any proportion of the share capital of Mexican companies, acquire fixed assets, enter new fields of economic activity or manufacture new product lines, open and operate establishments, and expand or relocate existing ones, except as expressly contemplated by the applicable regulations and which, of course, I will deal with from now on.

On the other hand, national investment is understood to be made by Mexican persons, whether individuals or companies or those with the immigration status of permanent residents, on trade and/or economic activities in Mexico.

Finally, it’s important to note that for the purposes of determining the percentage of foreign investment in economic activities subject to maximum limits of participation by the law, the foreign investment that is carried out indirectly through companies shall not be counted as foreign investment if it’s carried out by companies with a majority of Mexican capital although they have a portion of foreign capital, as long as they are not controlled by foreign investment.

3) Activities Reserved For the State

The functions determined by the laws in the following strategic areas are exclusively reserved to the State:

I.- Exploration and extraction of oil and other hydrocarbons, in terms of the provisions of articles 27, seventh paragraph and 28, fourth paragraph of the Political Constitution of the United Mexican States^[1] and its regulatory law.

II.- Planning and control of the national electrical system, as well as the public service of transmission and distribution of electrical energy, in terms of the provisions of articles 27, sixth paragraph and 28, fourth paragraph of the Political Constitution of the United Mexican States^[2] and its regulatory law.

III.- Generation of nuclear energy.

IV.- Radioactive minerals.

V.- Telegraph.

VI.- Radiotelegraphy.

VII.- Postal service.

VIII.- Bank note issuing.

IX.- Minting of coins.

X.- Control, supervision, and surveillance of ports, airports, and heliports.

4) Economic activities and Companies Reserved for Mexican Individuals

The economic activities and companies set out below are reserved exclusively for Mexican individuals or Mexican companies with an exclusion clause for foreigners^[3] and are the following:

I.- Domestic land transportation for passengers, tourism, and freight, not including messenger or courier services.

II.- Development banking institutions under the terms of the law governing the matter.

III.- The provision of professional and technical services that expressly indicate the applicable legal provisions.

Foreign investment may not participate in the activities and companies mentioned directly, nor through trusts, agreements, social or statutory pacts, pyramid schemes, or any other mechanism that grants them control or participation, except for what is related to the so-called neutral investment. —and which is studied later—.

5) Activities with Specific Regulation

After stating the activities in which only the Mexican State participates and then its nationals, it’s then the turn to know those in which foreign capital can participate, which are the following:

Up to 10%

I.- Cooperative companies for production.

Up to 49%

I.- Manufacture and marketing of explosives, firearms, cartridges, ammunition, and fireworks, not including the acquisition and use of explosives for industrial and extractive activities, nor the preparation of explosive mixtures for the consumption of said activities.

II.- Printing and publication of newspapers for circulation solely throughout Mexico.

III.- Series “T”^[4] shares in companies owning agricultural, livestock, and forestry lands.

IV.- Fresh water, coastal, and exclusive economic zone fishing, not including fisheries.

V.- Integral port administration.

VI.- Port pilot services for inland navigation under the terms of the law governing the matter.

VII.- Shipping companies engaged in the commercial exploitation of ships for inland and coastal navigation, excluding tourism cruises and exploitation of marine dredges and devices for port construction, conservation, and operation.

VIII.- Supply fuel and lubricants for ships, airplanes, and railway equipment.

IX.- Broadcasting. This maximum foreign investment shall be subject to the reciprocity that exists in the country of the constitution of the investor or economic agent who exercises control, in the last instance, directly or indirectly.

X.- Regular and non-scheduled national air transport service; non-scheduled international air transportation service in the form of air taxi; and specialized air transportation service.

The limits for the participation of foreign investment indicated in this section may not be exceeded directly nor through trusts, agreements, social or statutory pacts, pyramid schemes, or any other mechanism that grants control or participation greater than that is established, except for what concerns neutral investment.

Up to 49%+

Notwithstanding the above, Mexico’s Foreign Investment Law itself authorizes that by resolution of the National Foreign Investment Commission, foreign investment may participate in a percentage greater than 49% in the following economic activities and companies:

I.- Port services to allow ships to conduct inland navigation operations, such as towing, mooring, and barging.

II.- Shipping companies engaged in the exploitation of ships solely for high-seas traffic.

III.- Concessionaire or permissionaire companies of airfields for public service.

IV.- Private education services of pre-school, elementary, middle school, high school, college, or any combination.

V.- Legal services.

VI.- Construction, operation, and exploitation of public railways and public services of railway transportation.

In all hypotheses mentioned above, the Commission must resolve upon the requests submitted to its consideration within a period which shall be at most 45 business days from the date of the request. Moreover, to evaluate the proposals submitted for its approval, the Commission shall observe the following criteria:

I. Impact upon employment and training of workers.

II. Technological contribution.

III. Compliance with environmental provisions included in the matter’s ecological regulations.

 IV. In general, if it contributes to increasing the competitiveness of the country’s productive system.

6) Acquisition of Real Estate

In accordance with the provisions of section I of article 27 of the Political Constitution of the United Mexican States^[5], Mexican companies with a foreign exclusion clause or that have entered into the agreement referred to in the indicated section may acquire the ownership of real estate in the national territory following the following rules:

A) Acquisition in a Restricted Area

I.- Foreigners may acquire ownership of real estate located in the restricted zone^[6], intended for the performance of non-residential activities, and must give notice of said acquisition to the Ministry of Foreign Affairs within 60 business days following that in which the acquisition is made.

Now, by way of example, the following are considered real estate intended for the performance of non-residential activities:

1.- Those intended for timeshare.

2.- Those intended for industrial, commercial, or tourist activity and simultaneously used for residential purposes.

3.- Those acquired by credit institutions, financial intermediaries, and auxiliary credit organizations for the recovery of debts in their favor that arise from operations specific to their purpose.

4.- Those that are used by legal entities to fulfill their corporate purpose, consisting of the sale, urbanization, construction, subdivision, and other activities included in the development of real estate projects until the moment of their commercialization or sale to third parties.

5.- In general, real estate used for commercial, industrial, agricultural, livestock, fishing, and service provision activities.

If there is any doubt about whether a property is intended for residential activities, the Ministry of Foreign Affairs shall resolve the respective query within a period not exceeding 10 business days. Once this period has expired without a resolution being issued, it shall be understood that non-residential activities are carried out in the property in question.

II.- Foreigners may acquire rights over real estate in the restricted zone intended for residential purposes^[7] in accordance with the rules established for trusts over real estate in the restricted zone set forth below.

B) Acquisition in a Non-Restricted Area

Foreigners who intend to acquire real estate outside the restricted zone or obtain concessions for the exploration and exploitation of mines and waters in the national territory must previously submit to the Ministry of Foreign Affairs a document in which they agree to the provisions of section I of article 27 of the Political Constitution of the United Mexican States already cited and obtain the corresponding permission from said agency.

When the real estate to be acquired is in a municipality completely located outside the restricted zone or when the intention is to obtain a concession for the exploitation of mines and waters in national territory, the permit shall be deemed granted if it is not published in the Official Gazette of the Federation the refusal of the Ministry of Foreign Affairs within 5 business days following the date of submission of the application.

When the property to be acquired is in a municipality partially located within the restricted zone, the Ministry of Foreign Affairs shall resolve the request within 30 business days of its presentation.

C) Request’s Content

For the purposes of complying with the notice to the Ministry of Foreign Affairs, interested parties must state the following in their request:

I.- The location and description of the property.

II.- A clear and precise description of the uses of the property in question.

III.- Simple copy of the public instrument recording the formalization of the acquisition.

D) Trusts On Real Estate in Restricted Areas

Permission from the Ministry of Foreign Affairs is required for credit institutions acting as fiduciaries to acquire rights over real estate located within the restricted zone when the purpose of the trust is to allow the use and exploitation of such property without constituting real rights over it, and they and the trustees are:

I.- Mexican companies without foreign exclusion clauses.

II.- Foreign individuals or companies.

The use and exploitation of real estate located in the restricted area shall be understood as the rights to use or enjoy the same, including, where applicable, the obtaining of fruits, products, and, in general, any return resulting from the operation and lucrative exploitation through third parties or the fiduciary institution.

The permit to carry out the operation shall be valid for 180 calendar days from its issuance. The Ministry of Foreign Affairs may extend the permit’s validity for an additional 180 calendar days only once, upon written request from the permit holder, justifying the intention to use the permit during the requested extension period.

E) Content of the Permit’s Request

The applications mentioned in the previous section must be submitted by the credit institutions through their fiduciary delegate and must contain the following:

I.- Name and nationality of the trustors.

II.- Name and nationality of the credit institution that will serve as trustee.

III.- Name and nationality of the trustee and, if any, of the second trustees and substitute trustees.

IV.- Duration of the trust.

V.- Use of the property.

VI.- Description, location, and surface area of ​​the real estate object of the trust.

VII.- Distance of the property from the border or the federal maritime land zone.

The request must always be accompanied by an attachment containing the measurements and boundaries of the property.

F) Special Requirements for Foreign Individuals or Legal Entities

In the case of foreign individuals or companies, the Ministry of Foreign Affairs shall grant the permissions referred to for the constitution of trusts over real estate in a restricted area, when in addition to complying with the previous requirements, the trust contract is intended:

I.- Industrial parks and subdivisions.

II.- Hotels and motels.

III.- Industrial buildings.

IV.- Malls.

V.- Research centers.

VI.- Tourist developments, as long as they do not contain properties intended for residential purposes.

VII.- Tourist marinas.

VIII.- Docks and industrial and commercial facilities established therein.

IX.- Consular offices and official residences of foreign governments.

G) Conditions of Trust Contracts

For trust contracts that are established under the permits set forth above for the acquisition of real estate in the restricted area, said trusts must comply with the following conditions:

I.- That the respective public instrument establishes that foreign trustees agree to consider themselves as Mexicans concerning their rights as trustees and not to invoke, therefore, the protection of their governments under the penalty, otherwise, of losing said rights to the nation’s benefit.

The foregoing shall not apply in cases where foreign governments appear as trustees and the purpose of the trust is to establish consular offices and official residences for foreign governments.

II.- That throughout the duration of the trust, the financial institution retains ownership of the trust property without granting real rights to the trustees.

III.- That the fiduciary institution submit to the Ministry of Foreign Affairs, no later than April of each year, a report on the authorized trusts in the event of fiduciary substitution, as well as the designation of substitute trustees or transfer of trust rights in favor of natural persons or foreign corporations, or Mexican companies with a clause for the admission of foreigners, in the case of properties acquired for residential purposes.

IV.- That the trustees are obliged to inform the fiduciary institution about the fulfillment of the purposes of the trust, and the latter is obliged to notify the Ministry of Foreign Affairs about the matter when required to do so, provided that there are reasons that make imply non-compliance with the conditions under which the permit was granted.

In the event of non-compliance or violation of any of the conditions established in the corresponding permit, the fiduciary institution shall have 60 business days to correct them, counting from the date the Ministry of Foreign Affairs notifies the institution of said irregularities.

V.- That the trust institution obtain prior permission from the Ministry of Foreign Affairs in the case of expansion of the matter and change of the purposes of the trust.

VI.- That the fiduciary institution undertakes to notify the termination of the trust to the Ministry of Foreign Affairs within 40 business days following its date of termination.

VII.- That the parties to the contract undertake to extinguish the trust at the request of the Ministry of Foreign Affairs within a period of 180 days from the notification of the requirement, in the event of non-compliance or violation of any of the conditions established in the corresponding permit.

H) Duration of the Trust

The duration of these types of trusts shall be for a maximum period of 50 years, which may be extended at the request of the interested party. On the other hand, in this case the Ministry of Foreign Affairs may verify at any time compliance with the conditions under which the aforementioned permits are granted, as well as the presentation and veracity of the content of the notices provided therein.

For this purpose, the interested parties, through the fiduciary institutions, must request the extension of the duration of the trusts before the Ministry of Foreign Affairs within 90 business days prior to the termination of the contract.

I) Resolution to the Request

Finally, the Ministry of Foreign Affairs shall decide on the granting of the permits referred to in this section, considering the economic and social benefit within 5 business days following the date of your request before the competent central administrative unit or within the following 30 business days if it is presented at the state delegations of the said secretariat. Once these deadlines have expired without an express resolution being issued, the respective request shall be deemed approved.

7) Commercial Companies

The Ministry of Economy shall authorize the use of the names or company names under which the companies intend to be established. The exclusion clause for foreigners or the agreement provided for in section I of article 27 of the Political Constitution of the United Mexican States mentioned above must be inserted in the statutes of the companies that are formed.

Companies that modify their foreign exclusion clause to the admission clause must notify the Ministry of Foreign Affairs within 30 business days following the date of said modification.

The requests referred to in the two previous paragraphs must be resolved within 2 business days following their presentation.

8) Investment of Foreign Companies

Without detriment to the provisions of international treaties and agreements to which Mexico is a party, the following must obtain authorization from the Ministry of Economy:

I.- Foreign legal entities that intend to habitually carry out commercial acts in Mexico.

II.- Foreign legal entities of a private nature in terms of article 2736^[8] of the Civil Code for the Federal District (today Mexico City)

The authorization shall be granted as long as the following requirements are met:

I.- That these legal entities verify that they are constituted in accordance with the laws of their country.

II.- That the social contract and other constituent documents of said foreign companies are not contrary to the precepts of public order established in Mexican laws.

III.- Foreign legal entities have an agency or branch in the Mexican Republic, while private foreign legal entities have a representative domiciled in the place where they are going to operate, authorized to respond to the obligations they contract.

A) Attachments

In original and simple copy:

I.- Deed, minutes, certificate, or any other instrument of incorporation, as well as the statutes by which the legal entity is governed.

II.- Power of attorney granted before a notary public.

III.- Proof of payment of duties provided for in the Federal Law of Duties.

When the applicant needs to obtain a favorable resolution from the National Foreign Investment Commission to participate in a certain activity, the resolution must be processed beforehand, and the application must be attached.

B) Resolution

Any request that meets the aforementioned requirements must be granted within 15 business days following the date of its presentation. Once this period has expired without a resolution being issued, it shall be deemed approved.

9) Neutral Investment

A) Concept

Neutral investment is that made in Mexican companies or trusts that is not counted to determine the percentage of foreign investment in their share capital.

B) Neutral Investment in Instruments Issued by Fiduciary Institutions

The Ministry of Economy may authorize fiduciary institutions to issue neutral investment instruments that shall only grant, with respect to companies, pecuniary rights to their holders and, where appropriate, limited corporate rights without granting their holders voting rights in their ordinary general assemblies.

The Ministry of Economy has a maximum of 35 business days to grant or deny the requested authorization, counting from the day following the presentation of the application. Once this period expires without a resolution being issued, the respective request shall be deemed approved.

On the other hand, authorization from the Ministry of Economy is required for the constitution or modification of all types of neutral investment trusts, as well as for the transfer of shares to them, regardless of the activity carried out by the company that intends to trust its shares. To obtain this authorization, the trust institutions, in the first case, and the trustor companies, in the second case, must present:

I.- Written request in which they specify the general identification data of the trust institution and, where applicable, the economic activity and shareholding structure of the company that intends to transfer its shares to the trust assets.

II.- Draft trust contract or, where applicable, the modifications intended to be made to a previously authorized trust.

III.- Proof of payment of duties in accordance with the Federal Law of Duties.

C) Neutral Investment Represented by Special Series of Shares

Investment in shares without voting rights or with limited corporate rights is considered neutral, provided that they obtain prior authorization from the Ministry of Economy and, when applicable, from the National Banking and Securities Commission.

The Ministry of Economy has a maximum of 35 business days to grant or deny the requested authorization, counting from the day following the presentation of the application. Once this period expires without a resolution being issued, the respective request shall be deemed approved.

In this sense, companies already established or to be established, regardless of the activity they carry out, must obtain prior authorization from the Ministry of Economy to issue special series of shares as neutral investment. To obtain this authorization, companies must present the following:

I.- Written request in which they specify the general identification, corporate, and economic activity data carried out by the requesting company.

II.- Proof of payment of duties in accordance with the Federal Law of Duties.

10) National Foreign Investment Commission

A) Integration

The National Foreign Investment Commission is the administrative body in charge of dictating and promoting foreign investment policy. It comprises the Secretaries of State of the Interior, Foreign Affairs, Finance and Public Credit, Social Development, Environment, Natural Resources and Fisheries, Energy, Commerce and Industrial Development^[9], Communications and Transport, Tourism, and Labor and Welfare Social.

Said commission must meet at least semiannually and shall decide on matters within its jurisdiction by majority vote, with its president having the casting vote, who shall always be the Secretary of State for the Economy.

B) Powers

The National Foreign Investment Commission shall have the following powers:

I.- Dictate policy guidelines regarding foreign investment and design mechanisms to promote investment in Mexico.

II.- Resolve, through the Ministry of Economy, on the origin and, where applicable, on the terms and conditions of the participation of foreign investment in activities or acquisitions with specific regulation, such as those described in section 5) of this entry.

III.- To be a mandatory consultation body on foreign investment for the agencies and entities of the federal public administration.

IV.- Establish criteria for applying legal and regulatory provisions to foreign investment through the issuance of general resolutions.

C) Operation

As a general rule, the National Foreign Investment Commission must resolve the applications submitted for its consideration within 45 business days from the date of submission of the respective application. If the commission does not resolve the issue within the established period, the request shall be considered approved in the terms presented.

In any case, to evaluate the requests that individuals make available to the commission, it shall meet the following criteria:

I.- The impact on employment and worker training.

II.- The technological contribution.

III.- Compliance with environmental provisions.

IV.- The contribution to increase the competitiveness of the country’s productive plant.

Finally, it’s important to report that, in a very vague way, the Foreign Investment Law empowers the National Foreign Investment Commission for acquisitions by foreign investment. Acquisitions that referred to in the hypotheses described in section 5) of this entry.

D) Requests’ Resolution

In order for the National Foreign Investment Commission to resolve the applications submitted for its consideration, applicants must submit the following to the Executive Secretary of the Commission:

I.- Written application, in original and a simple copy, in which the main characteristics of the project are described, as well as the general identification data of the applicant.

II.- Questionnaire, in original and a simple copy, which must contain a mention of the type of project to be carried out by the applicant and the data that proves the benefits of the project for the country’s economy.

III.- If the applicant is an individual, updated resume or biographical summary of the foreign investor.

IV.- If the applicant is a foreign legal entity, annual report or description of the activities of the last tax season.

V.- In the case of an already established company, articles of incorporation and audited financial statements corresponding to the last tax season.

VI.- When you intend to establish a branch in the Mexican Republic, the articles of incorporation and bylaws of the foreign legal entity.

VII.- Proof of payment of duties provided for in the Federal Law of Duties.

11) National Registry of Foreign Investments

By provision of the Foreign Investment Law, the National Registry of Foreign Investments was created which, for privacy purposes, shall not be public. According to the regulations of the law, it’s divided into the following sections:

I.- First Section: foreign individuals and legal entities.

II.- Second Section: companies.

III.- Third Section: trusts agreements.

A) What Must Be Registered

It’s mandatory to register the following in the National Registry of Foreign Investments:

I.- Mexican companies in which they participate, even through a trust agreement: a) foreign investment; b) Mexicans who possess or acquire another nationality and have their domicile outside the national territory; or c) neutral investment.

II.- Those who habitually carry out acts of commerce in the Mexican Republic, provided that they are: a) foreign individuals or legal entities,  or b) Mexicans who possess or acquire another nationality and have their domicile outside the national territory.

III.- Trusts of shares or corporate interests, real estate, or neutral investment, under which rights are derived in favor of foreign investment or of Mexicans who possess or acquire another nationality and have a domicile outside the national territory.

Registration in the above cases must be carried out within 40 business days from the date of incorporation of the company or participation of the foreign investment; formalization or protocolization of the relative documents of the foreign company; or constitution of the respective trust or granting of trustee rights in favor of foreign investment.

B) Information for the Registration of Individuals, Foreign Legal Entities and Mexican Companies

To obtain registration and keep the information submitted to the National Registry of Foreign Investments updated, the above subjects must provide the following information:

I.- Date on which they begin the usual performance of commercial acts or the establishment of the branch or date of incorporation and date of entry of the foreign investment.

II.- Data to determine the nationality, origin, value and general characteristics of the capital or corporate assets investment.

III.- Data of the legal representative.

IV.- Names of persons authorized to receive notifications.

V.- Data to determine the people’s identity, economic activity and location subject to registration.

VI.- Data to determine the value of income and expenses derived from: a) new contributions and reserves or withdrawal of any of these, which do not affect the share capital; b) retention of profits from the last fiscal year and disposition of accumulated retained profits and c) loans payable or receivable to subsidiaries resident abroad; to the headquarters outside; to foreign investors residing abroad who participate as partners or shareholders, and to foreign investors residing abroad who are part of the corporate group to which the subject obliged to submit the report belongs.

VII.- Corporate, accounting, financial, employment, production, and economic activity data of the person subject to registration, as well as identification data and the person who can be consulted for clarifications.

C) Trust Agreements Registration

To obtain the registration of trusts and keep the information presented in the National Registry of Foreign Investments updated, trust institutions must provide:

I.- The date of execution of the trust contract.

II.- The identification and address data of the fiduciary institution and delegate.

III.- The name of the people authorized by the fiduciary to receive notifications.

IV.- The data to determine the nationality, origin, value and general characteristics of the investment made in the country through a trust.

V.- The general data of the trust contract.

The above information must be provided when submitting the registration request and within 40 business days following the date on which any change to said information occurs.

Finally, there shall only be the obligation to update the information referred to in this section when the investment exceeds the amount determined by the National Foreign Investment Commission through a general resolution published in the Official Gazette of the Federation.

D) Registration Certificates

The National Registry of Foreign Investments shall issue registration certificates when the application contains the following data:

I.- Name, or company name, address, date of incorporation if applicable, and main economic activity to be carried out.

II.- Name and address of the legal representative.

III.- Name and address of the persons authorized to receive notifications.

IV.- Name, or company name, nationality and condition of residency if applicable, address of the foreign investors, and the percentage of their participation.

V.- Amount of subscribed and paid share capital.

VI.- Estimated date of start of operations and approximate amount of total investment with its schedule.

E) Intervention of Public Notaries

In the constitution, modification, transformation, merger, division, dissolution, and liquidation of commercial companies, civil societies, and associations and in general, in all legal acts and events where the persons required to register in the Registry intervene on their own or represented National Institute of Foreign Investments, public notaries shall require said persons or their representatives to prove their registration with the registry or, where applicable, that registration is in progress.

If the above is not proven, the notary public may authorize the public instrument in question and shall report such omission to the National Registry of Foreign Investments within 10 business days following the date of authorization of the instrument so that, if applicable, it is said registry which imposes the corresponding sanctions.

F) Annual Renewal

Subjects required to register in the National Registry of Foreign Investments must annually renew their registration certificate, for which it shall be enough to present an economic-financial questionnaire in accordance with the general resolution issued for this purpose by the National Foreign Investment Commission during the first 5 months of each year.

12) Sanctions

As a general rule, when acts are carried out in violation of the provisions contained in our country’s Foreign Investment Law, the Ministry of Economy may revoke the authorizations granted to operate.

Likewise, social and statutory acts, agreements, or pacts declared null and void by the Ministry of Economy for being contrary to the provisions of the relevant law shall not have legal effects between the parties nor be enforceable against third parties.

A) Violations

Specifically, the Foreign Investment Law stipulates the following violations and ways to punish them:

Sanction	Violation
Fine of 1,000 to 5,000 salaries[10]	Carry out activities, acquisitions, or any other act that requires a favorable resolution from the National Foreign Investment Commission without having previously obtained this.
Fine of 500 to 1,000 salaries.	In the event that foreign legal entities habitually carry out commercial acts in Mexico without having obtained authorization from the Ministry of Economy.
Fine of 100 to 300 salaries.	In case of carrying out acts in contravention of the provisions of the Foreign Investment Law regarding neutral investment.
Fine of 30 to 100 salaries.	In case of omission, untimely compliance, presentation of incomplete or incorrect information regarding the obligations of registration, report or notification to the National Registry of Foreign Investments by the obligated subjects.
Fine of up to the amount of the operation.	In the case of simulation of acts with the purpose of allowing the enjoyment or disposal of real estate in the restricted area to foreign natural or legal persons or to Mexican companies that do not have a foreign exclusion clause.
Fine of 100 to 1,000 salaries	In the case of other violations of the Foreign Investment Law that do not have a specific sanction.

B) Right of Defense

To determine and impose sanctions, the interested party must be heard in advance. In the case of pecuniary sanctions, the nature and severity of the violation, the offender’s economic capacity, the time elapsed between the date on which the obligation had to be fulfilled, and its compliance or regularization, and the total value of the operation must be taken into consideration.

By Omar Gómez

Partner

Mexican Tax, Administrative and Constitutional Attorney

beLegal abogados S.C

Abogados en Ciudad Juárez, Chihuahua, México

Visit my website at www.ogomezabogado.com

Contact the firm at [email protected] or call (656) 774-75-73 for English assistance or (656) 271-41-43 for Spanish assistance.

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^[1] Article 27.- […]

In the case of oil and solid, liquid or gaseous hydrocarbons in the subsoil, the property of the Nation is inalienable and imprescriptible and no concessions shall be granted. With the purpose of obtaining income for the State that contributes to the long-term development of the Nation, it shall carry out the activities of exploration and extraction of oil and other hydrocarbons through assignments to productive companies of the State or through contracts with them or with individuals, in the terms of the Regulatory Law. To comply with the purpose of said assignments or contracts, State productive companies may contract with individuals. In any case, the hydrocarbons in the subsoil are property of the Nation and this must be stated in the assignments or contracts. […]

Article 28.- […]

The functions that the State exercises exclusively in the following strategic areas shall not constitute monopolies: postal, telegraph and radiotelegraphy; radioactive minerals and nuclear power generation; the planning and control of the national electrical system, as well as the public service of transmission and distribution of electrical energy, and the exploration and extraction of oil and other hydrocarbons, in the terms of the sixth and seventh paragraphs of article 27 of this Constitution, respectively; as well as the activities expressly indicated by the laws issued by the Congress of the Union. Satellite communication and railways are priority areas for development national in the terms of article 25 of this Constitution; The State, when exercising its stewardship over them, shall protect the security and sovereignty of the Nation, and when granting concessions or permits, it shall maintain or establish control of the respective means of communication in accordance with the laws of the matter. […].

^[2] Article 27.- […]

In the cases referred to in the two previous paragraphs, the domain of the Nation is inalienable and imprescriptible and the exploitation, use or exploitation of the resources in question, by individuals or by companies constituted in accordance with Mexican laws, cannot be carried out except through concessions, granted by the Federal Executive, in accordance with the rules and conditions established by law, except in radio broadcasting and telecommunications, which shall be granted by the Federal Telecommunications Institute.

The legal regulations relating to works or exploitation of the minerals and substances referred to in the fourth paragraph, shall regulate the execution and verification of those that are carried out or must be carried out from their validity, regardless of the date of granting of the concessions, and failure to comply shall give rise to their cancellation. The Federal Government has the power to establish national reserves and eliminate them. The corresponding declarations shall be made by the Executive in the cases and conditions that the laws provide. In the case of radioactive minerals, no concessions shall be granted.

The planning and control of the national electrical system, as well as the public service of transmission and distribution of electrical energy, corresponds exclusively to the Nation; In these activities no concessions shall be granted, without prejudice to the fact that the State may enter into contracts with individuals under the terms established by law, which shall determine the way in which individuals may participate in other activities of the electrical industry. […].

^[3] Which consists of the express agreement or pact that forms an integral part of the corporate statutes, which establishes that commercial companies shall not directly or indirectly admit foreign shareholders or investors as partners, nor companies with a clause for the admission of foreigners.

^[4] Shares that exclusively represent the capital contributed in agricultural, livestock, or forest lands, or that destined for the acquisition of the same in terms of the Agrarian Law.

^[5] Article 27.- […]

The ability to acquire ownership of the lands and waters of the nation shall be governed by the following requirements:

I. – Only Mexicans by birth or naturalization and Mexican societies have the right to acquire ownership of lands, waters and their accessions or to obtain mining or water exploitation concessions. The State may grant the same right to foreigners, provided that they agree before the Ministry of Relations to consider themselves as nationals with respect to said property and not to invoke the protection of their governments as regards those; under the penalty, in case of failure to comply with the agreement, of losing for the benefit of the Nation, the assets that they had acquired by virtue of it. In a strip of one hundred kilometers along the borders and fifty on the beaches, under no circumstances shall foreigners be able to acquire direct control over lands and waters.

The State, in accordance with internal public interests and the principles of reciprocity, may, in the opinion of the Ministry of Relations, grant authorization to foreign States to acquire, in the permanent place of residence of the Federal Powers, private property of real estate necessary for the direct service of their embassies or legations.

^[6] A restricted zone is understood to be the strip of national territory of one hundred kilometers along the borders and fifty along the beaches.

^[7] Residential purpose being understood as that intended exclusively for housing for the use of the owner or third parties.

^[8] ARTICLE 2736.- The existence, capacity to be the holder of rights and obligations, operation, transformation, dissolution, liquidation and merger of the legal entities, foreign companies of a private nature shall be governed by the law of their constitution, understood as that of the state in which the requirements of form and substance required for the creation of said persons are met.

In no case shall the recognition of the capacity of a foreign legal entity exceed that granted by the right under which it was established.

When a foreign person of a private nature acts through a representative, it shall be considered that such representative, or whoever substitutes him, is authorized to respond to the claims that are made against said person due to the acts in question.

^[9] Due to the fact that article 26 of the Organic Law of the Federal Public Administration has undergone enormous reforms, the former Ministry of Commerce and Industrial Development is today called the Ministry of Economy, being the case that said name has not been established in all the articles of the Foreign Investment Law.

^[10] For the purposes of the sanction, salaries must be understood as the general minimum wage in force in Mexico City at the time the violation is determined.