Brief introduction to Mexican bankruptcy law
Mexico was one of the many Latin American countries that amended their bankruptcy laws pursuant to the recommendations of the UNCITRAL Model law.
Under the Mexican bankruptcy law, each case is assigned to a federal judge, who is assisted by specialists appointed by the Federal Institute of Reorganisation Specialists (IFECOM is the Spanish acronym), which was created for the sole purpose of guiding civil judges through the bankruptcy process.
In general, a case might have three phases: (a) bankruptcy trial; (b) reorganization, and if no reorganization is implemented, (c) liquidation. A civil judge, with guidance from specialists appointed by IFECOM, oversees these three phases from the outset.
A debtor is deemed to have generally defaulted on their payment obligations if:
a) a payment default has occurred with respect to the claims of at least two creditors;
b) payments are past their due after more than 30 days and represent 35% or more of all the debtor's payment obligations as of the date of the filing; and/or
c) the debtor does not have liquid assets to pay at least 80% of the obligations past due as of the date of the filing.
A debtor may commence a voluntary reorganisation proceeding if it satisfies condition (a) and either (b) or (c). A creditor or the Attorney General can file an involuntary reorganisation proceeding only if all three conditions are satisfied.
The law tends to promote cooperation and agreement, focuses more on reorganisation and since the beginning of the process, involves court-appointed officials. If this conciliation process fails, the debtor enters into liquidation.
Rodolfo Sánchez Arellano, Patner
New Corporate Approach, S.C., Mexico, Mexico
T: +52 55 5574 49 33
Rodolfo Sánchez Arellano is a tax partner at New Corporate Approach, S.C., a firm located in Mexico City. He has more than 20 years of experience in advising clients on corporate taxation, international taxation and cross border transactions as well as real estate and infrastructure matters.