Mexican Legal Framework of Business Insolvency - White & Case
Mexican Legal Framework of Business Insolvency - White & Case Mexican Legal Framework of Business Insolvency - White & Case
42 The conciliator shall resolve issues pertaining to the assumption or rejection of contracts, any post-commencement financing, implementation or substitution of collateral and the disposition of assets out of the ordinary course of business [LCM 75]. g. Suspension of Payments The judgment declaring the debtor en concurso shall include an order to the debtor to suspend the payment of its pre-commencement indebtedness, except for essential expenses for the ordinary course of business [LCM 43-VIII], labor-related payments [LCM 66] and tax claims [LCM 69]. The suspension of payments benefit is one of the most powerful tools for preserving the estate, as it legally suspends the enforcement of pre-commencement claims and allows for an orderly reorganization of the debtor’s affairs. h. Stay of Execution Once a judgment that declares the debtor en concurso is entered, attachment and foreclosure on assets are stayed during the conciliatory stage, with the sole exception of cases involving privileged labor-related claims [LCM 43-IX, 65]. Like the suspension of payments benefit, the stay of execution is also a very powerful tool to preserve the estate. The stay will apply to any and all attachment and foreclosure processes concerning the debtor’s assets. It is still an unresolved matter whether the declaration of concurso will stay foreclosure procedures under a guaranty trust to which the debtor’s assets were transferred prior to commencement. It is worth noting that individual actions and proceedings are not stayed by the concurso declaration [LCM 84].
i. Disposition of Assets During conciliation, the debtor may dispose of assets in the ordinary course of business, but will require the conciliator’s consent to dispose of assets out of the ordinary course of business [LCM 75]. The reader can find further analysis on this subject in Section 32. j. Avoidance Powers Insolvency proceedings (both liquidation and reorganization) may commence long after a debtor first becomes aware that such an outcome cannot be avoided. In that intervening period, there may be significant opportunities for the debtor to attempt to hide assets from creditors, incur artificial liabilities, make donations or gifts to relatives and friends or pay certain creditors to the exclusion of others. There may also be opportunities for creditors to initiate strategic action to place themselves in an advantageous position. The result of such activities, in terms of the eventual insolvency proceedings, generally disadvantages ordinary unsecured creditors who were not party to such actions and do not have the protection of a security interest…Many insolvency laws include provisions that apply retroactively from a particular date (such as the date of application for, or commencement of, insolvency proceedings) for a specified period of time (often referred to as the “suspect” period) and are designed to overturn those past transactions to which the insolvent debtor was a party or which involved the debtor’s assets where they have certain [negative] effects…Transactions are typically made avoidable in insolvency to prevent fraud (e.g., transactions designed to hide assets for the later benefit of the debtor or to benefit the officers, owners or directors of the debtor); to uphold the general enforcement of creditors’ rights; to ensure equitable treatment of all creditors by preventing favoritism where the debtor wishes to advantage certain creditors at the expense of the rest; to prevent a sudden loss of value from the business entity just before the supervision of the insolvency proceedings is imposed.... 30 Some types of transactions carried out prior to the declaration of concurso can be set aside. The transactions subject to avoidance are grouped in four categories: (1) per se fraudulent transactions; (2) cases of constructive fraud; (3) objective preferences; and (4) subjective preferences. 30 UNCITRAL (2005), pp. 135-136. White & Case 43
- Page 1 and 2: Mexican Legal Framework of Business
- Page 3 and 4: Mexican Legal Framework of Business
- Page 5: Maria Teresa Fernández Labardini*
- Page 8 and 9: PART IIISpecial Insolvencies ......
- Page 10 and 11: 2 Consignment Consignación Coopera
- Page 12 and 13: 4 Priority claim Crédito con privi
- Page 15 and 16: Introduction All of a debtor’s as
- Page 17 and 18: PART I Out-of-Court Restructuring O
- Page 19 and 20: One of the risks that suppliers of
- Page 21 and 22: Under either of the two approaches,
- Page 23 and 24: . Prevention of Systemic Risk Anoth
- Page 25 and 26: verification and admission of claim
- Page 27 and 28: The issue is still divided between
- Page 29 and 30: the debtor to arrive at a consensua
- Page 31 and 32: v. Remuneration Specialists are ent
- Page 33 and 34: after his death, if the creditors
- Page 35 and 36: The above court precedent has two f
- Page 37 and 38: 2. Voluntary Acceptance Small merch
- Page 39 and 40: ii. Passive Estate Since a branch i
- Page 41 and 42: For a debtor to be considered a hol
- Page 43 and 44: ■■ Shutting down the enterprise
- Page 45 and 46: ■■ The facts that motivate the
- Page 47 and 48: filing such proofs of claim and ind
- Page 49: 29 P. 161. i. Conservative Measures
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- Page 61 and 62: chattel 35 ) unless its price is pa
- Page 63 and 64: c. Extensions of Credit An extensio
- Page 65 and 66: 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
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- Page 79 and 80: extend to guarantors or co-obligors
- Page 81 and 82: the reorganization plan); (3) all s
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- Page 85 and 86: ii. Timing Removal takes effect leg
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42<br />
The conciliator shall resolve issues pertaining to the assumption or rejection <strong>of</strong><br />
contracts, any post-commencement financing, implementation or substitution <strong>of</strong><br />
collateral and the disposition <strong>of</strong> assets out <strong>of</strong> the ordinary course <strong>of</strong> business [LCM 75].<br />
g. Suspension <strong>of</strong> Payments<br />
The judgment declaring the debtor en concurso shall include an order to the debtor<br />
to suspend the payment <strong>of</strong> its pre-commencement indebtedness, except for essential<br />
expenses for the ordinary course <strong>of</strong> business [LCM 43-VIII], labor-related payments<br />
[LCM 66] and tax claims [LCM 69]. The suspension <strong>of</strong> payments benefit is one <strong>of</strong> the<br />
most powerful tools for preserving the estate, as it legally suspends the enforcement<br />
<strong>of</strong> pre-commencement claims and allows for an orderly reorganization <strong>of</strong> the<br />
debtor’s affairs.<br />
h. Stay <strong>of</strong> Execution<br />
Once a judgment that declares the debtor en concurso is entered, attachment and<br />
foreclosure on assets are stayed during the conciliatory stage, with the sole exception<br />
<strong>of</strong> cases involving privileged labor-related claims [LCM 43-IX, 65]. Like the suspension<br />
<strong>of</strong> payments benefit, the stay <strong>of</strong> execution is also a very powerful tool to preserve<br />
the estate.<br />
The stay will apply to any and all attachment and foreclosure processes concerning the<br />
debtor’s assets. It is still an unresolved matter whether the declaration <strong>of</strong> concurso will<br />
stay foreclosure procedures under a guaranty trust to which the debtor’s assets were<br />
transferred prior to commencement.<br />
It is worth noting that individual actions and proceedings are not stayed by the concurso<br />
declaration [LCM 84].
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