By: Luis Gerardo Ramírez Villela
Nationally and internationally, transactions regarding mergers and acquisitions can occur as a stock/equity interest acquisition or as an asset purchase acquisition.
In the case of assets acquisitions in Mexico, the legal audit process will be important to prove that the assets to be transmitted have all the related information and documentation necessary to formalize their sale.
It should be noted that regardless of the legal due diligence, accounting and tax advisors must also participate in the due diligence to validate the acquisition process.
Notwithstanding, in this type of transactions it is very important to verify that the assets are not subject to some type of lien or encumbrance whatsoever, for the transmission of these assets to be immediate and have no future risks associated thereto. Likewise, for this type of assets it will be necessary to verify that it has the corresponding licenses and permits and that there is no risk associated to environmental matters.
In this regard, in connection to the acquisition of real estate properties, it will be necessary to (i) verify before the corresponding Public Registry of Property (Registro Público de la Propiedad) the non-existence of liens or encumbrances in order to transmit its property and notify previously to such registry and make preventive annotations for preliminary registration, and (ii) make a commercial appraisal in order to have a reference parameter of the commercial value of the property and thus be able to negotiate the definitive purchase price.
With regard to movable assets, it will always be necessary to verify that they do not have liens or encumbrances registered before the Unique Movable Assets Registry (Registro Único de Garantías Mobiliarias) (better known as RUG), as well as that there are no specific annotations in the corporate books of the seller or judicial embargoes that could affect the assets subject to transmission.
It is important to mention that in Mexico, although this acquisition modality has been used in recent years, by virtue of the tax reforms that became enforceable last year, asset sale have decreased if the assets to be acquired include relevant part of the seller's business, and the fiscal authority could consider such transaction as the sale of an ongoing business and, consequently, the acquisition would be assimilable to a stock/equity interests purchase and, in such case, the consequences of such type of transaction would follow the asset transactions.
By virtue of the above, it will be very important to verify during all the process with accounting, tax and legal advisors to determine the most adequate structure to carry out the asset purchase transaction and have less risks not only with respect to the assets to be acquired and also regarding tax and legal consequences to carry out the transaction.
