According to article 16 of the Mexican Commercial Insolvency Law (in Spanish “Ley de Concursos Mercantiles”), a foreign company can be declared under insolvency in Mexico, but only regarding the branches and goods located in Mexican territory.

Yet, if a cross border insolvency proceeding has been initiated abroad, the Mexican Courts may dictate several remedies (provisionally) and also to execute the orders issued within a foreign insolvency proceeding, regarding the company’s goods and properties located in México, in order to protect the estate and creditor’s rights.

An amendment to various Articles of the General Business Corporation Law was published in the Federal Official Gazette on January 24, 2018, which contemplates the following changes:

Since 2012, after an important Human Rights Constitutional reform on 2011, Mexican Federal Courts have had different interpretations and have issued contradictory judgments regarding the priority and ranking of consumer’s credits in bankruptcy proceedings. This debate was resolved by two jurisprudences of the Civil Plenary of the First Circuit, which were published on August 2018.

Judge Robert W. Sweet of the U.S. District Court for the Southern District of New York held inCT Investment v. Carbonell and Grupo Costamex, 2012 WL 92359 (S.D.N.Y. Jan. 11, 2012), that comity should be extended to an order issued by a Mexican district court overseeing the Mexican bankruptcy proceeding (concurso mercantil) of Cozumel Caribe S.A. de C.V. (“Cozumel Caribe”) under Mexico’s Ley de Concursos Mercantiles (the “Mexican Business Bankruptcy Act”). In so holding, Judge Sweet stayed the U.S.

Founded in 1909, Vitro, S.A.B. de C.V., is the leading glass manufacturer in Mexico, and one of the largest in the world, backed by more than 100 years of experience in the industry. It is headquartered in Monterrey, Mexico, and has subsidiaries in Europe and the Americas.

The dueling judicial decisions in Mexico and the United States regarding the proposed restructuring of the Mexican enterprise, Vitro S.A.B., de C.V., and its affiliates (collectively, “Vitro”), and its strong opposition by a group of U.S. noteholders, became must-read thrillers for finance and bankruptcy professionals, as well as distressed-debt investors.

Over the last several years, the number of Chapter 15 filings has continued to grow. One of the most prominent of these bankruptcy filings is the Vitro S.A.B. de C.V. case. When last we reported on theVitro case, the Texas bankruptcy court administering the Chapter 15 case had denied recognition to the Mexican restructuring plan of Vitro because the plan provided third party releases to non-debtors. See Vitro, S.A.B.: Bankruptcy Court Refuses to Recognize Mexican Concurso That Releases Claims Against Non-Debtors” (November 2012).

On January 10, 2014, the Federal Executive Branch of México published in the Official Gazette the legal amendments to México’s Commercial Bankruptcy Law (Ley de Concursos Mercantiles, or LCM), effecting the most comprehensive set of changes to the LCM since its enactment over 13 years ago, and establishing new rules for bankruptcy proceedings in México with the intent to improve the position of creditors dealing with the insolvency of local companies.

Those of us old enough to remember the passage of the North American Free Trade Agreement (or NAFTA) recall its promise of free movement of goods, services, persons, and capital between Canada, the United States, and Mexico, and greater economic prosperity in each of these countries.

* This article was first published by INSOL International on March 16, 2015.

Upholds Extraterritorial Application of 11 U.S.C. § 362 Automatic Stay