Mexican Legal Framework of Business Insolvency - White & Case

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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.
causes for dissolution has occurred….Once another cause for dissolution exists, the partners are entitled to change the corporate purpose, admit new partners or restitute the equity capital…. A court precedent confirms this position: DISSOLUTION OF A COMMERCIAL COMPANY. FOR ANY INTERESTED PERSON TO APPLY FOR ITS REGISTRATION WITH THE PUBLIC REGISTRY OF COMMERCE, IT IS PROCEDURALLY NECESSARY TO PROVE THAT THE SHAREHOLDERS’ MEETING HAS RECOGNIZED THE CAUSE FOR DISSOLUTION. Within the causes of total dissolution of a company foreseen in Article 229 of the LGSM, the one provided in Section I [passing of its term] does not require any type of recognition, since it becomes effective the moment the term for which the company was created expires. On the other hand, all other causes of dissolution foreseen in such Article [229 of the LGSM], except for the voluntary dissolution foreseen in Section III, which provides that the company may dissolve as a result of a partner resolution to that effect, do require a declaration [of recognition], which declaration is not voluntary but rather necessary due to the multiplicity of legal engagements the company acquired during its corporate life. Now, a literal interpretation of the second paragraph of Article 232 of the LGSM infers that prior to requesting the registration of the dissolution of a company, a declaration from the company recognizing the cause for dissolution is required. In this context, any interested person must satisfy the procedural requisite of [proving] the company’s prior recognition of the cause for dissolution, to request the registration of the dissolution of such company. Unfortunately, the issue of what constitutes losing two-thirds of the equity capital is unclear. There are two main approaches to interpret this case: (1) a company having accumulated losses which, in the aggregate are equal to or higher than, an amount equal to two-thirds of the equity capital; or (2) the net worth of the company falling to an amount that is below one-third (implies “losing” two-thirds) of the amount of the equity capital. Arguably, the second alternative is the correct line of interpretation; however, no precedent resolving this issue has been found. White & Case 111
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Mexican Legal Framework of Business
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Mexican Legal Framework of Business
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Maria Teresa Fernández Labardini*
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PART IIISpecial Insolvencies ......
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2 Consignment Consignación Coopera
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4 Priority claim Crédito con privi
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Introduction All of a debtor’s as
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PART I Out-of-Court Restructuring O
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One of the risks that suppliers of
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Under either of the two approaches,
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. Prevention of Systemic Risk Anoth
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verification and admission of claim
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The issue is still divided between
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the debtor to arrive at a consensua
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v. Remuneration Specialists are ent
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after his death, if the creditors
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The above court precedent has two f
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2. Voluntary Acceptance Small merch
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ii. Passive Estate Since a branch i
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For a debtor to be considered a hol
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■■ Shutting down the enterprise
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■■ The facts that motivate the
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filing such proofs of claim and ind
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29 P. 161. i. Conservative Measures
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i. Disposition of Assets During con
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■■ ■■ Granting of collatera
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All assets acquired by the concubin
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■■ ■■ Claims for an uncerta
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chattel 35 ) unless its price is pa
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c. Extensions of Credit An extensio
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the negotiable instruments and the
Page 67 and 68: epayment or abandonment shall apply
Page 69 and 70: ■ ■ Swaps: transactions in whic
Page 71 and 72: If the subject matter of the constr
Page 73 and 74: Netting of obligations in light of
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Page 77 and 78: . The Reorganization Plan The purpo
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Page 81 and 82: the reorganization plan); (3) all s
Page 83 and 84: If a debtor does not successfully c
Page 85 and 86: ii. Timing Removal takes effect leg
Page 87 and 88: Claims by creditors operate at two
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Page 91 and 92: predictability in commercial relati
Page 93 and 94: The receiver may oppose the foreclo
Page 95 and 96: ■■ A foreign proceeding is a co
Page 97 and 98: Conditioning the application of cro
Page 99 and 100: f. Enabling and Access The rules of
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Page 105 and 106: concerning the coordination of proc
Page 107 and 108: 20. Non-bank Financial Sector Firms
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Page 111 and 112: Capitalization is an important indi
Page 113 and 114: A bank would be declared en concurs
Page 115 and 116: Bank restructuring through support
Page 117: 30. Purchase-and-Assumption A bank
Page 121 and 122: [LCM 75]. The determination as to w
Page 123 and 124: 33. Securities Market 84 Holders of
Page 125 and 126: A reorganization plan would be enfo
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Page 129 and 130: Galindo (1957). GALINDO GARFIAS, Ig
Page 132: whitecase.com In this publication,
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Mexican Legal Framework of Business Insolvency - White & Case

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