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HIGHLIGHTS OF INCORPORATION OF COMPANIES, DISSOLUTION & LIQUIDATION

HIGHLIGHTS OF INCORPORATION OF COMPANIES, DISSOLUTION & LIQUIDATION. INCORPORATION OF A MEXICAN COMPANY. MOST COMMON CORPORATION. SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE (SADECV). COMPANY FORMED BY STOCK. BOARD OF DIRECTORS OR SOLE MANAGER. CORPORATE EXAMINER.

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HIGHLIGHTS OF INCORPORATION OF COMPANIES, DISSOLUTION & LIQUIDATION

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  1. HIGHLIGHTS OF INCORPORATION OF COMPANIES, DISSOLUTION & LIQUIDATION

  2. INCORPORATION OF A MEXICAN COMPANY

  3. MOST COMMON CORPORATION • SOCIEDAD ANÓNIMA DE CAPITAL VARIABLE (SADECV). • COMPANY FORMED BY STOCK. • BOARD OF DIRECTORS OR SOLE MANAGER. • CORPORATE EXAMINER. • SOCIEDAD DE RESPONSABILIDAD LIMITADA DE CAPITAL VARIABLE(SDERLDECV). • COMPANY COMPOSED BY INDIVIDUALS. • BOARD OF MANAGER OR GENERAL MANAGER. • IS NOT MANDAROTY TO APPOINT CORPORATE EXAMINER. • PASS THROUGH TAXES IN THE US.

  4. BOTH TYPE OF COMPANIES ARE REQUIRED TO BE RECORDED WITH • FEDERAL TAXPAYERS REGISTRY/RFC (ALSO THE LEGAL REPRESENTATIVE) • SOCIAL SECURITY OFFICE (IMSS/INFONAVIT) • STATE FINANCE DEPARTMENT/FOR PAYROLL PURPOSES • PUBLIC REGISTRY RECORDER OFFICE • FOREIGN INVESTMENTS RECORDER OFFICE • NATIONAL IMMIGRATION OFFICE/ IF FOREIGN INDIVIDUALS ARE APPOINTED AS EXECUTIVES OR TECHNICIANS AT THE PLANT/LEGAL REPRESENTATION BY FOREIGNER INDIVIDUALS • FOREIGN TRADE PROGRAMS(1) IMPORTERS REGISTRY;(2) IMMEX; OR (3)PREOSEC • CITY LICENSE OF OPERATION/FIRE DEPARTMENT SERVICES AND USE OF LAND(ZONING) • STATE ENVIRONMENTAL MANIFEST IF (HAZARDS MATERIALS HANDLING IN THE MANUFACTURING PROCESS)

  5. COMPANY’S DISSOLUTION A dissolution implies transforming the company’s production activity into a liquidation activity. When dissolving, the Company shall conclude and terminate any relationship established with third parties. There are several causes for the dissolution of a company, being one of these, the agreement between the partners.

  6. The procedure begins with an Extraordinary Shareholders Meeting in which the dissolution of the company is resolved and appointment of one or more liquidators.

  7. PREPARING FOR DISSOLVING THE CORPORATION • LABOR ISSUES • LEASE AGREEMENT TERMINATION • REAL ESTATE TAX IMPLICATIONS • SUPPLIERS OBLIGATIONS • PENDING ORDERS • SERVICES AGREEMENT • LOAN AGREEMENTS • MAQUILA AND BAILMENT AGREEMENTS TERMINATION • TAX IMPLICATIONS

  8. TAX IMPLICATIONS TO TAKE INTO ACCOUNT Intercompany balance Impact of anydeferralsforincometaxor flat tax Balance of taxaccounts: CUFINRE CUFIN CUCA Forecast of ending balances Dividen distribution Capital increase (capital reduction)

  9. EFFECTS OF THE DISSOLUTION • Disappearance of the ordinary administrators. • The Company maintains its legal status • Transformation of the ordinary activity into a liquidation activity. • Delivery to of Assets and documentation to the Liquidators includes assets and real estate and it shall extend to the company’s books and documents.

  10. The Company’s corporate name changes to include in all its acts the words “company in liquidation”. • Liquidators are the new administrators of the Company. • The powers of attorney of all the Company’s officers are revoked.

  11. Conclusion of pending businesses in the less prejudicial manner for creditors and for shareholders. • Collection of credits and payment of debts. 9.1Compliance with pending obligations (e.g. cancellation of agreements). 9.2 Payment of any debts.

  12. Sale of the company’s assets.10.1Demand compliance of any obligations in favor of the company. 10.2Sale of company’s assets. • Preparation of Final Liquidation Balance. • Distribution of the remaining balance, if any, among the shareholders. 13. Of course, notices to the tax authorities and tax returns

  13. LIQUIDATORS’ RESPONSIBILITY Liquidators have control of all Assets and are responsible for any of their acts exceeding the limits of their duties. It is expressly prohibited to liquidators distributing to the shareholders any remainder, prior to paying any other pending credit.

  14. PUBLIC ANNOUNCEMENT OF THE LIQUIDATION It shall be carried out to avoid any deceit or fraud against third parties in good faith. The Minute containing the dissolution agreement, as well as the liquidators’ appointment shall be recorded at the Public Registry. The Public Registry shall include in its record the words “in liquidation”.

  15. ASSETS SPLITTING OR DISTRIBUTION TO PARTNERS. • To proceed to distribute the remaining amount to the partners, liquidators shall prepare the Company’s Final Balance Sheet, indicating the part that corresponds to each of the partners. • Said Balance shall be published in three occasions (with a period of 10 days between each), through the Official Daily Gazette of Baja California. During said term, such Balance shall be available to the partners, as well as all the company’s documentation and accounting, in order that they are able to make any pertinent comment or claim.

  16. Partners may oppose to the distribution of the remaining amounts, however they may do so within the 15 days following the date of the last publication. • Having said term elapsed, liquidators shall call for a Shareholders Meeting, in order to approve the Balance, and in case the same is approved each of the partners shall receive their corresponding part, against delivery of their share certificates.

  17. Liquidators shall deposit at a financial institution any amount not claimed by any Shareholder within a term of two months, as of the date of the Balance’s approval. • Said Meeting shall be recorded at the Public Registry, in order to cancel the company’s entry. • Liquidators shall keep all books and general accounting pertaining to the Company for a period of 10 years, as of the date of such Shareholders Meeting.

  18. CONCLUSION Preparingtodissolve and terminateall Business Payment of alldebts and otherdeliveryobligations and sale of all company´sassets DISSOLUTION PERIOD 10 yearspurgeperiod Incorporation of Company and Business Activities • Shareholdersmeetingto: • Resolvedissolution • Appointliquidators • Shareholdersmeetingto: • Approve final balance • Liquidatethe shares • PublicnoticethroughtheStateofficialgazette

  19. Lic. Jorge M. Carreón Misión de San Javier No. 10661-9  Penthouse, Zona Río Tijuana, B. C. 22010 México Teléfono: (664) 634-2001 Telefax: (664) 634-2003 www.krasovsky.com.mx Héctor Silva Misión de San Javier No. 10643 piso 8  Zona Urbana Rio Tijuana Tijuana, B. C. 22010 México Teléfono: (664) 622-7840 Fax: (664) 681-7813 hsilva@deloittemx.com

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