#ClientAlert 8/2022

PROCEDURES BEFORE THE NATIONAL REGISTRY OF FOREIGN INVESTMENT (RNIE)

Following your kindest request and following the legal analysis, the purpose of this Memorandum is to present a compendium regarding the procedures that must be submitted before the National Registry of Foreign Investment (“RNIE”).

I. REGISTRATION BEFORE THE NATIONAL REGISTRY OF FOREIGN INVESTMENT
The Foreign Investment Act (“LIE”) provides that they must be registered in the National Registry of Foreign Investment; (i) foreign natural or moral persons who routinely perform act of commerce in the Mexican Republic; (ii) Mexican companies in which foreign investment participates in its share capital; and (iii) trusts for shares or social parties, real estate or neutral investment, under which rights in favor or foreign investment arise.

The application for registration before the RNIE must be submitted within 40 (forty) business days following the date:

(i) Where commercial activities have been initiated;
(ii) Incorporation of the company or participation of foreign investment;
(iii) Formalization of the relative documents of the foreign company;
(iv) Establishment of the respective trust or granting of trust rights in favor of foreign investment.

The procedure can be carried out through the interested party, as well as his legal representative and is free of charge, unless he is a creditor to a penalty for out-of-time compliance.

Once enrolled in the RNIE, you are required to report quarterly and annual information, if you exceed the thresholds set by the National Foreign Investment Commission. The omission and extemporaneous submission is punishable by a fine.
He Registry is divided into 3 (three) sections under which you must register:

1. First Section. Foreign natural and moral persons
2. Second Section. Entities
3. Third Section. Trusts

The people’s subject to registration in the First Section of the RNIE are all those who usually carry out acts of commerce in the Mexican Republic, provided that they are:
a) Foreign natural or moral personas; or
b) Mexicans who hold or acquire another nationality and who are domiciled outside the national territory.

The Second Section of the RNIE includes the Mexican companies in which foreign investment participates in its share capital.

In the Third Section of the RNIE, trust of shares or social parts, real estate or neutral investment, under which rights for foreign investment or Mexicans who own or acquire another nationality and who have their domicile outside the

national territory must be registered. The registration is responsibility of the trust institutions.

II. ANNUAL ECONOMIC REPORT
The Annual Economic Report is submitted by foreign natural or moral personas (First Section) and Mexican Companies with foreign investment in their share capital (Second Section) when one of the following accounts is greater than the amount established by the National Foreign Investment Commission by general resolution, i.e. $110´000,000.00 MXN (Hundred Ten Million Pesos 00/100 National Currency).

(i) Initial total asset;
(ii) Final total asset;
(iii) Initial total liabilities;
(iv) Final total liabilities;
(v) Income at home and abroad; and
(vi) Costs and expenses at home and abroad.

The Annual Report files information regarding the state observed by the company in the last fiscal year and which contains an accounting and financial balance sheet in historical and peso values, as well as its employment data. Such information shall comply with the following accounting equalities.

If you do not have this type of movements or be less than the above threshold it will not be necessary to submit the procedure.

The deadline for submitting the Annual Economic Report is as follows:

• Companies that begin their name between the letters “A” to “J” during April; and
• Companies that begin their name between the letters “K” to “Z”, numbers and special characters during May.

Characteristics to be followed by the information required in the Annual Economic Report:

• General filling conditions.
• If the number of employees’ data is not required, the reason why employees are not employed must be justified.
• If you have employees registered within the IMSS, questions for salaries, salaries and benefits of the income statement must be required.
• If you report fixed asset in the financial statement, you must request the questions for the Geographic Distribution of the fixed asset.
• Companies should always report historical share capital at least within accounting and financial information.

Documents to be attached exclusively to the Annual Economic Report

In addition to the documentation that proves the legal personality:

• Basic financial statements in accordance with current Financial Reporting Standards (financial statement, statement of income, statement of change to capital and statement of cash flows), mandatory.
• Document with the data of debtors and/or creditors if you report amounts in the initial and final amounts of more than twenty million pesos ($20’000,000) in any of the accounts receivable or payable to related parties abroad.
• List of companies that consolidate in case the reporting company consolidates financial information of the corporate group to which it belongs.

III. QUARTERLY UPDATE REPORT

A. In what cases should the Quarterly Update Report be filed?
In Section I and II, where there are changes in one of the following items:

(i) Name, name or company name.
(ii) Tax address.
(iii) Economic activity.

In Section I, where there are variations in one of the following accounts, more than twenty million pesos ($20’000,000.00 M.N.):
• Active. Accounts receivable to foreign residents who are part of the same corporate group.
• Passive. Accounts payable to foreign residents who are part of the same corporate group.
• Accounting Capital. Contributions from the matrix,
• Accounting Capital. Capital reserves or result of previous years.

In Section II, where there are variations in one of the following accounts, more than twenty million pesos ($20’000,000.00 M.N.):
• Social capital and/or share structure involving a change in the shareholding of foreign natural or moral persons.
• Active. Accounts receivable to subsidiaries residing abroad, Partners or Shareholders residing abroad and/or Companies resident abroad that are part of the corporate group and do not participate as partners or shareholders.
• Passive. Accounts payable to subsidiaries residing abroad, Partners or Shareholders residing abroad and/or Companies resident abroad that are part of the corporate group and do not participate as partners or shareholders.
• Accounting Capital. Contributions for future capital increases.
• Accounting Capital. Corporate capital reserves or Result of previous years.

B. When should the Quarterly Update Notice be filed?

Within 10 (ten) business days following the close of each quarter (January-March, April-June, July-September, and October-December). In the event that the filing exceeds the prescribed period, the liable subjects shall be liable to a penalty.

C. What features must the information required in the Quarterly Update Notice meet?

• General filling conditions
• The information declared in the share capital module must match the sum of the amounts in the shareholding structure module.

• If the number of employees is not available, the reason why no employees are available must be justified.
• In case of not reporting geographical destination of the investment, indicate the justification in the Field of Observations.
• If you do not report the source of the divestment, indicate the justification in the Comments field.

The information must be presented in pesos and without decimal places.

D. What documents should be exclusively appended to the Quarterly Update Notice?

• Copy of the document that checks the movement in equity, in case it exceeds one hundred and ten million pesos ($110’000,000).

• Document with the data of the stock trusts in case a trust participates as a shareholder.
• Document that checks the source of financing, in case of increases paid in kind or by capitalization.
• Document with the data of debtors and/or creditors if you report charges or credits of more than one hundred ten million pesos ($110’000,000) in any of the accounts receivable or payable to related parties abroad.
• Document with the name and amount of the contribution or withdrawal of each partner or shareholder, if it reports non-zero amounts in contributions for future capital increases.
• Basic financial statements in accordance with the current Financial Reporting Standards (financial statement, income statement, statement of change to capital and statement of cash flows) if any asset, liability or book capital account exceeds one hundred and ten million pesos ($110’000,000 M.N.).

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This document does not refer to laws other than the laws of Mexico; in addition, no additional accounting, tax or legal aspect is referred to as those expressly contained therein and should not be considered as a legal opinion, business recommendation, or recommendation to hold an operation by Grepe, Lavín & Zavaleta, S.C. The content of this document and the considerations contained therein are subject to any interpretation that any court or competent authority may issue on the laws, regulations and provisions referred to herein.

This document has been prepared solely for the benefit of its recipient, so no person outside the recipient may or should rely on its content without our prior consent.

The considerations contained therein are based solely on the Mexican legislation in force at the date of the preparation of the present and in case of changes in the applicable legislation or if any fact that could result in a change in the conclusions expressed in this document after the date of its elaboration is made we assume no obligation to supplement it.

We remain at your service for any questions or comments related to this document.