Mexican Legal Framework of Business Insolvency - White & Case

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c. Excluded Merchants
Merchants that are exempt from the application of the Insolvency Law include:
(1) “small merchants”; (2) state-owned entities; and (3) insurance and
bonding intermediaries.
i. Small Merchants
“Small merchants” shall not be declared en concurso unless they voluntarily accept
in writing the application of the Insolvency Law [LCM 5, T9]. This raises two issues:
(1) the issue of who qualifies as a small merchant; and (2) the issue of its voluntary
written acceptance to the application of the Insolvency Law.
1. Definition of Small Merchant
The Insolvency Law provides the definition of small merchant as (1) those whose
total outstanding debts do not exceed 400,000 UDIs [LCM 5] and (2) during
the first five years following the enactment of the Insolvency Law (i.e., until
May 13, 2005), those whose total outstanding debts (computed as the sum total of
the par value at the time they were originally contracted) as of the entry into force
of the Insolvency Law (i.e., May 13, 2000) did not exceed 500,000 UDIs [LCM T9].
The concept of small merchant was not present in the LCM Bill, but was added
by legislators during the course of the legislative process, arguing that the costs
associated with the application of the Insolvency Law made it inefficient for
small merchants. 16
There is a logical flaw in the concept, since the recognized amount of debt of a
debtor will only be known once the debtor has been declared en concurso and the
process for recognition of claims (cfr. 16.b) has concluded. Several consequences
of having been declared en concurso would have to be unwound by that time.
Cfr.
16 Dictamination from the Senate’s Joint Finance and Public Credit, Commerce, Justice, and Legislative
Studies Commissions.