Mexican Legal Framework of Business Insolvency - White & Case

PART V
Sundry Corporate and Other
Law Issues
This part of the book addresses in a general manner specific topics relating to sundry
corporate and other legal issues arising in the context of insolvency.
31. Director Liability 77
There are two time frames relevant to the analysis of director liability in the context of
insolvency: (1) in the vicinity of insolvency; and (2) during insolvency.
110
a. In the Vicinity of Insolvency
In the absence of an illicit action, directors of a debtor are not liable to creditors outside
of insolvency. 78 Mexico does not recognize the concept of the vicinity of insolvency (the
“twilight zone” or the “zone of insolvency”), so doctrines of wrongful trading are also
not recognized.
The only case remotely connected with wrongful trading consists of a concept in
the General Law of Commercial Companies under which, among other cases, the
loss of two-thirds of the equity capital of a commercial company gives grounds for
dissolution of the company. Should the company enter into new transactions once a
case of dissolution has been recognized, the directors of the company shall be jointly
and severally liable for the obligations of a company under those post-recognition
transactions [LGSM 229-V, 233].
Only the shareholders’ meeting of the company in question is entitled to “recognize”
that the case of dissolution has occurred. The rationale behind this is expressed in the
LGSM Bill, which provides:
The dissolution of companies, according to guidance from treatises, is regulated in a different
manner when it is produced ipso facto by the expiration of its term, and when it is the result
of a partner decision or the recognition by the company’s corporate bodies that another of the
77 This section does not address issues concerning director liability (1) with the debtor; (2) with creditors for matters
unrelated to insolvency; or (3) for criminal actions.
78 Cfr. Galindo (1957), pp. 170-203.