CNH publishes new guidelines on assignments, corporate changes and liens in hydrocarbon exploration and extraction contracts

Executive Summary:

• On March 8, 2023, the National Hydrocarbons Commission published Agreement CNH.E.89.010/2022 by which the Guidelines for Assignments, Corporate Changes and Liens are issued.
• The Guidelines are applicable to contracts for the exploration and extraction (CEE) of hydrocarbons and repeal the previous guidelines that establish the requirements and the procedure for entering into alliances or associations in which the transfer of corporate and management control or control of operations is carried out, with respect to hydrocarbon CEEs.
• The Guidelines will enter into force on March 9, 2023.

On March 8, 2023, the National Hydrocarbons Commission (“CNH”) published, in the Official Gazette of the Federation (“DOF”), Agreement CNH.E.89.010/2022 by which the Guidelines for Assignments, Corporate Changes and Liens (“Guidelines”) are issued.

The Guidelines are applicable to contracts for the exploration and extraction (“CEE”) of hydrocarbons. In addition, they repeal the previous guidelines that establish the requirements and procedure for entering into alliances or associations in which the transfer of corporate and management control or control of operations is carried out, with respect to hydrocarbon CEE, published in the DOF on January 30, 2017, as well as its modification published in the DOF on December 17, 2020.

Relevant Aspects

The Hydrocarbons Law states that the CNH must authorize, in advance, any partial or total transfer of operations, corporate control of a Contractor ⁽¹⁾ and/or the rights conferred under hydrocarbon EECs.

Based on the experience acquired by the CNH in recent years, these new Guidelines are issued with the aim of regulating more efficiently the review and approval procedure of the following “Procedures”:

• (i) Applications to accredit the legal, financial, technical, experience and execution capacities of the Contractors;
• (ii) Applications for authorization to enter into alliances or associations in which corporate and management control or control of operations is transferred;
• (iii) Applications to impose liens on the Participating Interest ⁽²⁾, and
• (iv) Notices of changes in share capital or Participation Interest.

Among the most relevant topics of the Guidelines are the following:

1. Regarding the request for accreditation of capabilities, the person who, in relation to his CEE, intends to carry out an assignment, to be part of a Contractor or intends to modify the structure of the share capital, whether fixed or variable, of an individual Contractor or a Participating Company ⁽³⁾ and which involves the departure of the jointly liable party, the CNH must be asked to evaluate the legal, financial, technical, experience and execution capacities of the potential assignee, the potential contractor or the potential jointly liable party.
2. Regarding the requirements for the transfer request, the Contractor shall submit an application for authorization of an assignment, by filling out forms and providing specific information and documentation, aimed at formalizing the agreements for the transfer of corporate and management control or the transfer of control of operations, as appropriate, and formalizing the amendment agreement to the CEE. In this sense, the definition of corporate and management control is not limited to direct control, but also includes indirect control up to the level of the company through which the Contractor or the Participating Company has accredited technical and financial capabilities.
3. Regarding the notice of change in the share capital structure of an individual Contractor or a Participating Company, which does not result in a transfer of corporate and management control, must notify the CNH of its completion by completing forms and providing specific information and documentation. In the event that said modification implies the departure of the jointly liable party, the Contractor or the new jointly liable party must prove that it maintains the same financial and, where applicable, technical, experience and execution capabilities as those demonstrated by the outgoing jointly liable party.
4. Regarding the notice of modification of the Participation Interest percentages between Participating Companies that make up a Contractor and that does not result in a transfer of corporate and management control or control of operations, the CNH must be notified of its completion by filling out forms and providing specific information and documentation.
5. Regarding the request to tax the Participation Interests, the CNH must give its consent for a Lien to be established ⁽⁴⁾ on part or all of the Participating Interest. The creation of a CNH Lien will be carried out by providing specific information and documentation. Likewise, the Guidelines establish the need to give notice to the CNH regarding the formalization, modification or termination of a Lien. In this regard, a definition of Creditor is included, as the persons in favor of whom a Lien is created.
6. Inclusion of new formats for the presentation of the information required for the Procedures.

Each procedure will be subject to payment of the corresponding fees and will have a specific procedure for the CNH to issue the respective resolution, with applicants having periods to correct any objections that the CNH may make. This is without prejudice to the CNH being able to deny any of the requested procedures.

The Guidelines will enter into force on March 9th 2023; However, the procedures initiated before the CNH prior to the entry into force of the Guidelines will be processed in accordance with the previous regulations in force at the time of submission of the corresponding procedure.

^Notes:

^{(1) Defined in the Guidelines as the person signing the Contract individually or Participating Companies or signatories of the CEE, jointly, as appropriate.}

^{(2) Defined in the Guidelines as the undivided share of each of the Participating Companies in the rights and obligations of the Contractor under a CEE entered into in a consortium or joint venture. In the case of individual Contractors, their Participating Interest is one hundred percent (100%).}

^{(3) Defined in the Guidelines as each of the Persons signing the CEE, including the operator, who together constitute a Contractor.}

^{(4) Defined in the Guidelines as the legal act entered into between the individual Contractor or the Participating Company, as applicable, and the Creditor, by which an obligation to give, do or not do with respect to the Participating Interest is established, and may consist of all types of guarantees in terms of the Guidelines.}