The insolvency systems for companies and other legal entities vary from country to country. The main purpose of insolvency legislation, however, is fundamentally the same worldwide. If there is important value in the business, we need to protect it in order for the company to continue as a viable business and pay creditors. If the liquidation value is higher than the operational value, jurisdictions have liquidation mechanisms that allow companies to efficiently exit the market and pay creditors through an ordered sale of assets.

In Mexico, all a debtor’s assets are subject to account for the performance of its obligations, except for those assets which, pursuant to law, are inalienable or cannot be attached.1 When a debtor is unable to pay its debts as they become due, it falls into insolvency which is an economic phenomenon with financial, social and legal consequences. When a debtor is unable to pay its debts as they become due, the Mexican legal system provides a mechanism to address the collective satisfaction of the claims with the assets of the debtor.

Juan Carlos Machorro, Carlos Olvera and Ricardo Orea, Santamarina y Steta

This is an extract from the 2021 edition of GRR's The Americas Restructuring Review. The whole publication is available here.

In summary

Eugenio Sepúlveda, Galicia Abogados

This is an extract from the third edition of The Guide to Corporate Crisis Management published by Latin Lawyer. The whole publication is available here.

Diego Sierra, Von Wobeser y Sierra SC

This is an extract from the 2020 edition of the Americas Restructuring Review, published by Global Restructuring Review. The whole publication is available here.

In summary

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.

According to the Federal Constitution (Article 17) and the international trades subscribed by the Mexican government, one of the most sacred human rights that exist nowadays is the right of “access to justice”, which can be translated into several specific rights, including that any jurisdictional authority (id est Court or Tribunal) must provide to all the particulars with an efficient resort to solve their claims effectively.

Eugenio Sepúlveda, Galicia Abogados

This is an extract from the second edition of the Guide to Corporate Crisis Management- published by Latin Lawyer. The whole publication is available here.