Mexico

Key Legislation

• Ley de Concursos Mercantiles (Insolvency Act) (applies for insolvent merchants)
• Commerce Code and Federal Civil Procedure Code (suppletory legislation)
• General Rules of the Insolvency Act (given by IFECOM)
• State civil codes (which apply to consumer cases)

Insolvency Procedures

Personal Insolvency procedures

Under Mexican legislation, there is a distinction, not between personal and corporate procedures, but between procedures involving merchants and non-merchants (consumers).Consumer insolvency procedures (which might involve associations), are governed by state rules.

Corporate Insolvency procedures

Insolvency procedures that involve merchants are considered of federal jurisdiction. The procedure has usually three stages:1. A period prior to the formal declaration of insolvency, where an auditor, appointed by IFECOM, renders his opinion on the liquidity of the merchant before the court.2. Once insolvency is judicially declared, a conciliator is appointed by IFECOM. The objective of this stage is to reach an agreement between creditors and debtor, if possible. There can also be a reorganization. The conciliator is in charge of credit recognition and classification.3. If the parties cannot reach an agreement, the judge declares bankruptcy and IFECOM appoints a trustee to execute the merchant’s assets. If the merchant himself files for insolvency, he can petition the judge to declare bankruptcy directly, that is, without the conciliation stage.

Roles

Role played by Government

IFECOM, the insolvency regulator in Mexico, is an organ pertaining to the Judiciary Branch. It is in charge of the register and surveillance of specialists. These are private sector insolvency practitioners who participate at different stages of the procedure, as a support to judges. This organ also supervises their performance in insolvency procedures.Remuneration of specialists is decided by the courts. However, their decisions are based on a scale of fees set by IFECOM, through administrative rules.Another important activity carried out by IFECOM is the elaboration of statistics related to insolvency procedures.

Role played by private sector practitioners

Specialists or private sector practitioners are independent professionals who act as auxiliaries to judges. Since judges are law experts, the objective of specialists is to aid judges in specific fields, such as accounting, administration, turnarounds or execution of assets, among others.There are three kinds of specialists, according to the procedural stage:1. Auditors. Stage prior to the formal declaration of insolvency. They determine if the merchant is insolvent or not. 2. Conciliators. Conciliation stage, once insolvency has been declared. These specialists draft a list of creditors, and suggests the order in which they ought to be paid. They also attempt to make creditors and debtor reach an agreement, in order to preserve the company.3. Trustees. Bankruptcy stage. In charge of selling or executing the assets of the merchant whose bankruptcy has been declared.

Role played by the Court

Insolvency procedures are decided before the courts, who have to decide: a) if the merchant is in fact insolvent, b) declare insolvency, c) rule on the recognition and classification of creditors, d) if there is an agreement between creditors and debtor, the judge has to approve it, e) if there is no agreement, the judge orders the execution of assets, and f) supervises payments made to creditors.The fact that judges have to recognize the agreement between creditors and debtor does not mean that it is impossible for them to settle outside of court. Only in the auditing stage, if the parties reach an agreement outside of court, the plaintiff can withdraw his demand

At a Glance

Does the insolvency system in Mexico allow for:

1.	Different procedures for the insolvency of individuals and the insolvency of companies?
2.	Creditors to accept an arrangement outside of formal bankruptcy/liquidation proceedings?
3.	Priority payment for employee creditors?
4.	Priority payment for taxation debts?
5.	Automatic disqualification of directors of failed companies from managing other companies?
6.	Recognition of insolvency proceedings being conducted in another jurisdiction?
7.	A government agency to undertake insolvency administration work?
8.	Some form of licensing of private sector practitioners?
9.	A review of the remuneration claimed by an insolvency practitioner by either a court or other government regulator?
10.	A mandatory scale of fees applicable to insolvency practitioner remuneration?
11.	Surveillance of the work of private sector practitioners by a government regulator?
12.	Collation of insolvency statistics by a government regulator?