Mexican Legal Framework of Business Insolvency - White & Case
Mexican Legal Framework of Business Insolvency - White & Case Mexican Legal Framework of Business Insolvency - White & Case
64 The insurance contract shall terminate automatically if the conciliator does not advise the insurance carrier of the existence of the concurso within 30 days of such declaration [LCM 109]. 11. Intuitu Personae Companies The declaration of concurso of a general partner or of a shareholder in a general partnership or a limited partnership, or of a partner in a limited liability partnership 43 shall give the debtor the right to partially liquidate the company and obtain its liquidation quota pursuant to the latest balance sheet or, with the conciliator’s authorization, continue as a partner in the issuing company [LCM 111]. o. Setoff and Netting Netting is a form of extinction of two claims by operation of law, up to the amount of the lesser claim, and it occurs when two persons are reciprocally the debtor and the creditor to each other [CCF 2185, 2186]. For netting to occur, (1) both obligations have to be for a sum certain, or with respect to fungible assets, of the same kind and quality [CCF 2187]; and (2) both obligations must be liquid and payable [CCF 2188]. An obligation is liquid if its amount has been determined or can be determined within nine days [CCF 2189], and is payable when its payment cannot be legally refused [CCF 2190]. Netting shall not occur if: (1) one or both parties waives it; (2) one of the debts derives from unlawful eviction; (3) one of the debts derives from alimony; (4) one of the debts is an annuity; (5) one of the debts derives from an obligation to pay minimum wage; (6) the debt is of a non-nettable nature, either by statute or by the instrument from which it originates, unless both debts are of equal status; (7) the debt consists of an asset placed in deposit; and (8) the debt is a tax obligation, unless specifically authorized by law [CCF 2192]. 43 Cfr. 10.b.iii for a brief explanation on the different types of entities.
Netting of obligations in light of concurso raises an important policy issue: A balance should be struck between the benefits of netting (commercial predictability, reduction of the scope of the estate and mitigation of systemic risk) and affording a privilege to some creditors not otherwise available to others. IMF (1999) provides an insightful analysis of this policy issue: An important issue that arises in the design of an insolvency law is the treatment of a creditor who, at the time of the initiation of the liquidation proceedings, also happens to be a debtor to the estate. If the fundamental principle of equality of treatment of similarly situated creditors were applied, the outcome would be relatively straightforward: The liquidator should be able to receive the full amount owed by the creditor and the creditor’s claim would be satisfied to the extent to which all other unsecured creditors get satisfied upon the liquidation of the estate. However, an alternative approach permits the creditor, in these circumstances, to exercise set-off rights against the estate after liquidation is initiated, with the effect that, depending on the size of the estate’s claim on the creditor, the creditor’s claim may be satisfied in full. There are several reasons why it may be appropriate to include the right of set-off in an insolvency law. The first is that of fairness: notwithstanding the importance of equality of treatment among creditors, it is considered unfair for a debtor to refuse to make payment to a creditor but, at the same time, to insist upon payment from that creditor. In addition, since many counterparties are banks, the right of set-off is particularly beneficial to the banking system and, because of the important credit creation role of banks, is therefore considered to be of general benefit to the economy. By virtue of their core functions (lending and deposit taking), banks that have lent to an entity that has gone bankrupt will often find that they have financial obligations to the debtor in the form of deposits. A postcommencement right of set-off would allow the banks to offset their unpaid claims with the debtor’s deposits even though these reciprocal claims are not yet due and payable. Even among countries that do not provide for a general right of set-off in the context of insolvency, set-off will still normally be permitted in two circumstances: if both claims are mature at the time insolvency takes place, or if the mutual claims arise from the same transactions. The Insolvency Law has taken the approach of allowing netting in specific cases provided therein. However, the cases in which netting is allowed are relatively broad. White & Case 65
- 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 and 50: 29 P. 161. i. Conservative Measures
- Page 51 and 52: i. Disposition of Assets During con
- Page 53 and 54: ■■ ■■ Granting of collatera
- Page 55 and 56: All assets acquired by the concubin
- Page 57 and 58: ■■ ■■ ■■ ■■ ■■
- Page 59 and 60: ■■ ■■ Claims for an uncerta
- 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: If the subject matter of the constr
- Page 75 and 76: they function generally determine f
- Page 77 and 78: . The Reorganization Plan The purpo
- Page 79 and 80: extend to guarantors or co-obligors
- 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
- Page 89 and 90: ■■ ■■ ■■ ■■ ■■
- 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
- Page 101 and 102: 30, 31, 32, 33, 34, 35, 36, 37, 38,
- Page 103 and 104: ii. Once Recognition Is Granted Onc
- Page 105 and 106: concerning the coordination of proc
- Page 107 and 108: 20. Non-bank Financial Sector Firms
- Page 109 and 110: ■■ ■■ If, however, somethin
- 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 and 118: 30. Purchase-and-Assumption A bank
- Page 119 and 120: causes for dissolution has occurred
- Page 121 and 122: [LCM 75]. The determination as to w
64<br />
The insurance contract shall terminate automatically if the conciliator does not<br />
advise the insurance carrier <strong>of</strong> the existence <strong>of</strong> the concurso within 30 days <strong>of</strong><br />
such declaration [LCM 109].<br />
11. Intuitu Personae Companies<br />
The declaration <strong>of</strong> concurso <strong>of</strong> a general partner or <strong>of</strong> a shareholder in a general<br />
partnership or a limited partnership, or <strong>of</strong> a partner in a limited liability partnership 43<br />
shall give the debtor the right to partially liquidate the company and obtain its<br />
liquidation quota pursuant to the latest balance sheet or, with the conciliator’s<br />
authorization, continue as a partner in the issuing company [LCM 111].<br />
o. Set<strong>of</strong>f and Netting<br />
Netting is a form <strong>of</strong> extinction <strong>of</strong> two claims by operation <strong>of</strong> law, up to the amount <strong>of</strong><br />
the lesser claim, and it occurs when two persons are reciprocally the debtor and the<br />
creditor to each other [CCF 2185, 2186].<br />
For netting to occur, (1) both obligations have to be for a sum certain, or with respect<br />
to fungible assets, <strong>of</strong> the same kind and quality [CCF 2187]; and (2) both obligations<br />
must be liquid and payable [CCF 2188]. An obligation is liquid if its amount has been<br />
determined or can be determined within nine days [CCF 2189], and is payable when its<br />
payment cannot be legally refused [CCF 2190].<br />
Netting shall not occur if: (1) one or both parties waives it; (2) one <strong>of</strong> the debts derives<br />
from unlawful eviction; (3) one <strong>of</strong> the debts derives from alimony; (4) one <strong>of</strong> the debts<br />
is an annuity; (5) one <strong>of</strong> the debts derives from an obligation to pay minimum wage;<br />
(6) the debt is <strong>of</strong> a non-nettable nature, either by statute or by the instrument from<br />
which it originates, unless both debts are <strong>of</strong> equal status; (7) the debt consists <strong>of</strong> an<br />
asset placed in deposit; and (8) the debt is a tax obligation, unless specifically authorized<br />
by law [CCF 2192].<br />
43 Cfr. 10.b.iii for a brief explanation on the different types <strong>of</strong> entities.
Change language