Mexican Legal Framework of Business Insolvency - White & Case

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d. Branches of Foreign Debtors
The branch of a foreign debtor is subject to the Insolvency Law, but only in connection
with tangible assets located, and intangible assets enforceable, in Mexico and with
respect to claims held by creditors for operations with those branches [LCM 16].
The natural consequence of this provision requires “ring fencing” the estate (cfr. 15.d),
which raises two distinct issues: one, concerning the location of assets (active estate);
and another, concerning the claims for operations attributable to a branch (passive
estate). Aside from the fact that in this case the Insolvency Law clearly strays from
universalism and adopts a territorial approach (cfr. 7), this provision requires carrying
out an analysis of the estate for which the Insolvency Law is ill-equipped:
i. Active Estate
The location of tangible assets can be relatively straightforward when dealing with
realty, but can get more complicated when dealing with chattel: 17 Would a transfer of
an asset from the relevant branch to the debtor’s headquarters or to another branch
be excluded from the estate? Would the transfer be avoided? Would the assets of
different branches located in Mexico be part of the relevant branch’s estate?
The issue is further complicated when dealing with intangible assets: 18 When is an
intangible asset enforceable in Mexico? What is the impact of an underlying debtor
relocating outside Mexico?
The Insolvency Law is silent as to these and other issues pertaining to the location
of assets.
17 Please refer to the Appendix for a summary of the differences between real property and chattel.
18 Sommer (1998) provides an excellent analysis on the location of liabilities (an intangible asset from the creditor’s
perspective), which the reader is encouraged to consult.