Mexican Legal Framework of Business Insolvency - White & Case

Introduction
All of 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
Insolvency is an economic phenomenon with economic, social and legal consequences.
When a debtor is unable to pay its debts as they become due, the legal system provides
for a mechanism to address the collective satisfaction of the claims from the assets of
the debtor.
The legal framework for business insolvency 2 can be seen from three different approaches:
(1) out-of-court restructuring; (2) court-assisted reorganization and liquidation; and
(3) administrative resolution.
Out-of-court restructuring is governed by scattered substantive and procedural rules, but
mostly by internationally recognized principles of conduct and professional practice in the
field. Court-assisted reorganization and liquidation are governed by the Insolvency Law.
The administrative resolution regime applies principally to banks, where swift regulatory
action is deemed necessary.
In an adaptation and extension from another paper, G10 (2002) provides a “timeline” of
financial distress for a debtor. This timeline includes four stages (or levels) of distress and
the tools to overcome the situation:
1
2
Stage Level of Distress Tool
First Emerging problems Management-led correction
Second Acute and worsening problems Private workout
Third Insolvency, but possible viability Reorganization
Fourth Insolvency and unlikely viability Liquidation
CCF 2964.
Insolvency of non-merchants is governed by the applicable state civil codes and is not addressed herein.
White & Case
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