1. Introduction
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.
The First Chamber of the Supreme Court recently handed down a decision dealing with the constitutionality of one of the timeframes set by the Bankruptcy Law for filing a proof of claim in bankruptcy proceedings.
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.
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.
The Mexican insolvency and bankruptcy law (“Ley de Concursos Mercantiles” or “LCM“) that came into effect on May 12, 2000, abrogated the Mexican Bankruptcy and Suspension of Payments Law. One of the stated purposes of the LCM was to mitigate the impact that globalization and the free market had on Mexican corporations, especially after ratification of the North American Free Trade Agreement in 1994. The LCM, therefore, seeks to preserve businesses facing a general default on the payment of their obligations and thereby preserve jobs in Mexico.
Mexican authorities plan to put 10 years worth of corporate insolvency documents online in order to bring transparency to the judicial system, which is often bogged down by bureaucracy.
Mexicana Airlines has reported that it has filed for bankruptcy protection in Mexico and will seek to reorganize. What does this mean for aircraft lessors and other creditors of Mexicana Airlines?
The Mexican Business Reorganization Act
With the enactment of the Ley de Concursos Mercantiles (the “LCM”) in 2000, Mexico took a dramatic step towards modernizing its bankruptcy and insolvency laws. Several years later, in 2007, Mexico took additional steps by enacting a number of reforms aimed to create or clarify the legal framework regarding various important topics that were novel in Mexico, including implementation of a process to obtain approval of pre-negotiated plans.
Bankruptcy and reorganization are the two primary procedures available for solving a collective action problem in dealing with financially troubled debtors, and both are regulated by the Montenegrin Insolvency Act. Bankruptcy envisages settlement with creditors by sale of the debtor’s assets or sale of the debtor as a legal entity, while reorganization involves settlement with creditors in accordance with an adopted reorganization plan which redefines mutual debtor-creditor relations.