By Baker & McKenzie Banking and Finance

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• General Law of Negotiable Instruments and Credit Transactions.
• General Law of Credit Auxiliary Organizations and Activities.
• Credit Institutions Law.
• General Law of Insurance Companies.
• Federal Law of Bonding Companies.
• Law to Regulate Financial Groups.
• Popular Savings and Credit Law.
• Foreign Investment Law.
• Income Tax Law.
• Value Added Tax Law.
• Federal Fiscal Code.

The most relevant features of the Amendments consist of (1) allowing the financial leasing and financial factoring activities to be granted by any individual or entity without requiring an authorization or being subject to the supervision of the Federal Government, and (2) the creation of Multiple Purpose Financial Entities (“Sociedades Financieras de Objeto Múltiple” or “SOFOMES”), as entities engaged in carrying out credit, financial leasing and financial factoring operations on a professional and regular basis.

I. Financial Leasing. Financial Factoring

Prior to the Amendments, financial leasing and factoring activities were reserved for entities duly authorized by the Ministry of Finance and Public Credit (“Secretaría de Hacienda y Crédito Público” or “SHCP”) to operate as Financial Leasing Companies and Financial Factoring Companies, respectively.

Both Financial Leasing Companies and Financial Factoring Companies were considered by the General Law of Credit Auxiliary Organizations and Activities (“Ley General de Organizaciones y Actividades Auxiliares del Crédito” or “LGOAAC”) as credit auxiliary organizations and as such, these entities were subject to the supervision and inspection of the National Banking and Securities Commission (“Comisión Nacional Bancaria y de Valores” or “CNBV”).

The modifications to the General Law of Negotiable Instruments and Credit Transactions (“Ley General de Títulos y Operaciones de Crédito” or “LGTOC”) contained in the Amendments, include the incorporation of new chapters to Title II of such statute. The new Chapter VI regulates the financial leasing while the new Chapter VII regulates the financial factoring. The chapters of the LGOAAC related to Financial Leasing Companies and Financial Factoring Companies are now repealed.

The incorporation of the financial leasing and financial factoring concepts to the text of the LGTOC, enables any person to carry out financial leasing and financial factoring activities in its capacity as lessor or factor, respectively, without the need to have an authorization from the SHCP nor being subject to the inspection and supervision of the Federal Government.

II. Multiple Purpose Financial Entities

A. General

The Amendments include several modifications to the LGOAAC in order to incorporate the SOFOMES, which are defined as entities engaged in carrying out credit, financial leasing and financial factoring transactions on a regular and professional basis.

Pursuant to the new text of the LGOAAC, the performance of such transactions on a regular and professional basis does not require authorization from the Federal Government.

The Amendments contemplate two types of SOFOMES:

1. Regulated SOFOMES. Are those that have an economic relationship with credit institutions or entities controlling financial groups of which credit institutions are a part. This type of SOFOMES will be subject to the supervision and inspection of the CNVB.

2. Unregulated SOFOMES. Are those that do not maintain economic relationship with the entities mentioned in number 1 above.

Some of the requirements set forth in the new text of the LGOAAC for an entity to be incorporated as SOFOME are the following:

• Provide as its main corporate purpose the professional and usual performance of credit and/or financial leasing, and/or financial factoring operations.

• Include in its corporate name the words “Sociedad Financiera de Objeto Múltiple” or its acronym “SOFOM”, followed by the words “Entidad No Regulada” or its initials E.N.R., or the words “Entidad Regulada” or its initials “E.R.”, as appropriate.

• Set forth in the financial leasing, financial factoring and credit agreements executed by them as well as in their marketing materials that their constitution and operation does not require the authorization from the SCHP.

• Non-Regulated SOFOMES shall set forth in the above mentioned agreements and materials that the realization of their financial leasing, financial factoring and credit operations are not subject to the supervision and inspection of the CNBV.

• Inform in writing its incorporation to the National Commission for the Protection and Defense of Financial Services Users (“Comisión Nacional para la Protección y Defensa de los Usuarios de Servicios Financieros” or “CONDUSEF)..

IMPORTANT DISCLAIMER: This document has been prepared by the Banking and Finance Practice Group of the Mexico offices of Baker & McKenzie for our clients and professional associates. This document only refers to Mexican law. While every effort has been made to ensure accuracy, no responsibility can be accepted for errors or omissions, however caused. The information contained in this document should not be relied on as legal advice and should not be regarded as a substitute for detailed advice in individual cases. No responsibility for any loss occasioned to any person acting or refraining from action as a result of material in this document is accepted by the authors or Baker & McKenzie. If advice concerning individual problems or other expert assistance is required, we would be pleased to oblige. Baker & McKenzie authorizes you to forward, reproduce, copy, archive and distribute this document without any changes and as long as you include the copyright notice below. The distortion, mutilation, modification or edition of this document is prohibited without the author's prior consent.
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