ICLG: Corporate Recovery and Insolvency 2012

Corporate Recovery and Insolvency 2012
The International Comparative Legal Guide to:
A practical cross-border insight into corporate recovery and insolvency work
6th Edition
Ali Budiardjo, Nugroho, Reksodiputro
Allen & Overy LLP
Anderson Mori & Tomotsune
Andreas Neocleous & Co LLC
Arthur Cox
Attorneys at law Borenius Ltd
Baker & Partners
Bonelli Erede Pappalardo
Campbells
Clifford Chance LLC
De Brauw Blackstone Westbroek
Debarliev, Dameski & Kelesoska, Attorneys at Law
Dickinson Wright LLP
El-Borai & Partners
Gall
Gilbert + Tobin
Gorrissen Federspiel
Hengeler Mueller
Hogan Lovells Studio Legale
Lenz & Staehelin
Loyens & Loeff
Olswang LLP
Pachiu & Associates
Paul, Weiss, Rifkind, Wharton & Garrison LLP
Pekin & Pekin
Pinheiro Neto Advogados
Rivera Gaxiola y Asociados, S.C.
Schoenherr
Sedgwick Chudleigh
Slaughter and May
Uría Menéndez
W&H Law Firm
White & Case Advokat AB
Published by Global Legal Group, in association with CDR, with contributions from:

www.ICLG.co.uk
Disclaimer
This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice.
Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication.
This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified
professional when dealing with specific situations.
Further copies of this book and others in the series can be ordered from the publisher. Please call +44 20 7367 0720
Contributing Editor
Sarah Paterson,
Slaughter and May
Account Managers
Dror Levy, Maria Lopez,
Florjan Osmani,
Oliver Smith, Rory Smith,
Samuel Romp, Toni Wyatt
Sub Editor
Fiona Canning
Editor
Suzie Kidd
Senior Editor
Penny Smale
Managing Editor
Alan Falach
Group Publisher
Richard Firth
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No photocopying
ISBN 978-1-908070-31-9
ISSN 1754-0097
Strategic Partners
The International Comparative Legal Guide to: Corporate Recovery and Insolvency 2012
Country Question and Answer Chapters:
4 Australia Gilbert + Tobin: Dominic Emmett & Nicholas Edwards 16
5 Austria Schoenherr: Dr. Wolfgang Höller & Mag. Dr. Barbara Steger 22
6 Belgium Allen & Overy LLP: Koen Van den Broeck & Thales Mertens 28
7 Bermuda Sedgwick Chudleigh: Alex Potts & Nick Miles 34
8 Brazil Pinheiro Neto Advogados: Luiz Fernando Valente de Paiva & André Moraes Marques 42
9 Bulgaria Advokatsko druzhestvo Andreev, Stoyanov & Tsekova in cooperation with
Schoenherr: Anton Andreev 47
10 Canada Dickinson Wright LLP: Lisa S. Corne & David P. Preger 53
11 Cayman Islands Campbells: J. Ross McDonough & Guy Cowan 60
12 China W&H Law Firm: Dr. Yin Zhengyou & Zhang Xueyun 66
13 Cyprus Andreas Neocleous & Co LLC: Elias Neocleous & Maria Kyriacou 72
14 Denmark Gorrissen Federspiel: John Sommer Schmidt 78
15 Egypt El-Borai & Partners: Dr. Ahmed El Borai & Dr. Ramy El Borai 84
16 England & Wales Slaughter and May: Sarah Paterson & Thomas Vickers 90
17 Finland Attorneys at law Borenius Ltd: Mika Salonen & Timo Seppälä 101
18 France Allen & Overy LLP: Rod Cork & Marc Santoni 107
19 Germany Hengeler Mueller: Dr. Ulrich Blech 116
20 Hong Kong Gall: Randall Arthur 123
21 Indonesia Ali Budiardjo, Nugroho, Reksodiputro: Theodoor Bakker & Herry N. Kurniawan 129
22 Ireland Arthur Cox: William Day & John Donald 134
23 Italy Bonelli Erede Pappalardo: Vittorio Lupoli & Andrea De Tomas 142
24 Japan Anderson Mori & Tomotsune: Tomoaki Ikenaga & Nobuyuki Maeyama 151
25 Jersey Baker & Partners: David Wilson & Ed Shorrock 157
26 Luxembourg Loyens & Loeff: Véronique Hoffeld & Laurent Lenert 161
27 Macedonia Debarliev, Dameski & Kelesoska, Attorneys at Law: Dragan Dameski &
Ivan Gjorgjievski 167
28 Mexico Rivera Gaxiola y Asociados, S.C.: Alonso Rivera Gaxiola &
Abraham Gómez Velázquez 173
29 Montenegro Moravčević Vojnović Zdravković in cooperation with Schoenherr:
Slaven Moravčević & Nikola Babić 180
30 Netherlands De Brauw Blackstone Westbroek: Berto Winters & Rob van den Sigtenhorst 186
31 Portugal Uría Menéndez − Proença de Carvalho: Pedro Ferreira Malaquias &
David Sequeira Dinis 193
32 Romania Pachiu & Associates: Florin Dobre & Alexandru Lefter 198
33 Serbia Moravčević Vojnović Zdravković in cooperation with Schoenherr:
Matija Vojnović & Vojimir Kurtić 204
34 Slovenia Filipov o.p. d.o.o. in co-operation with Schoenherr: Ana Filipov & Vid Kobe 210
35 Spain Uría Menéndez: Alberto Núñez-Lagos Burguera & Ángel Alonso Hernández 216
36 Sweden White & Case Advokat AB: Carl Hugo Parment & Michael Gentili 223
37 Switzerland Lenz & Staehelin: Daniel Tunik & Tanja Luginbühl 228
38 Turkey Pekin & Pekin: Gökben Erdem Dirican & Pınar Denktaş 235
39 Ukraine Clifford Chance LLC: Olexiy Soshenko & Andrii Grebonkin 243
40 USA Paul, Weiss, Rifkind, Wharton & Garrison LLP: Alan W. Kornberg &
Elizabeth R. McColm 249
General Chapters:
1 Insolvency Law and Contract: Policy and Practice in the US and UK – Sarah Paterson &
Elena Prattent, Slaughter and May 1
2 Date Certain Requirements in Insolvency Scenarios: An Italian Peculiarity – Filippo Chiaves,
Hogan Lovells Studio Legale 5
3 Schemes of Arrangement under the Companies Act 2006 for Foreign Companies – Alicia Videon &
Julian Turner, Olswang LLP 10

WWW.ICLG.CO.UKICLG TO: CORPORATE RECOVERY AND INSOLVENCY 2012
© Published and reproduced with kind permission by Global Legal Group Ltd, London
Chapter 28
173
Mexico
1 Issues Arising When a Company is in
Financial Difficulties
1.1 How does a creditor take security over assets in Mexico?
According to Mexican legislation, generic security exists in that the
debtor responds for the performance of its obligations with all its
assets, except for those that, by Law, are inalienable and
unattachable. Notwithstanding the foregoing, certain specific
security exists governed by different legislations, the most
traditional ones being a bond (of a personal nature), pledge and
mortgage (of a real estate nature), although others exist such as (i)
the right of withholding or lien, (ii) retention of title in purchase-
sales, (iii) deposits, (iv) joint liability, (v) guarantee by
endorsement, (vi) security derived from working capital or
equipment loan agreements, (vii) loss of benefits, and (viii)
attachment of property, among others.
Such security may be created: (i) contractually, in which case the
general rule is that they follow the same fate as the principal
obligation; (ii) as an effect of a law, being established as certain
preferences over other creditors (tax authorities, workers, people
entitled to maintenance); or (iii) as a consequence of a court order.
1.2 In what circumstances might transactions entered into
whilst the company is in financial difficulties be vulnerable
to attack?
“Concurso Mercantil” (Commercial Bankruptcy), governed by the
Commercial Bankruptcy Act (Ley de Concursos Mercantiles -
“LCM”), consist of two successive phases, conciliation and
bankruptcy, the purpose of the former being: “the conservation of the
company of the Merchant by means of the agreement signed with its
Acknowledged Creditors” and the purpose of the latter is: “the sale of
the company of the Merchant, of its production units and of the assets
that form it for payment to the Acknowledged Creditors”. Such
proceeding begins with the declaration that the Merchant is in
“concurso mercantil” (any individual or legal entity that having legal
capacity to exercise commerce, make it their normal occupation,
companies incorporated in accordance with commercial laws, foreign
corporations or the agencies and branches thereof, which exercise
acts of commerce in Mexico, in accordance with the Commercial
Code. For the effects of the LCM, such concept includes the trust
assets, when the performance of business activities is affected, and
holding companies or subsidiary companies).
According to the LCM, a period exists immediately prior to the
declaration that the Merchant is in concurso mercantil, known as
the “Retroaction Period” (in our legislation this period runs for 270
calendar days, extendable under certain conditions by decision of
the judge, in the case that it is demonstrated that the debtor was
generally in default of payment of its obligations as such concept is
governed by Article 10 of the LCM, even before such period), in
which the operations of the debtor are examinable and, in certain
cases, voidable or may be declared ineffective regarding the
Bankrupt Estate (which is the estate of the debtor subject to the
concurso mercantil). These cases of ineffectiveness or voidability
are those in which the operation or operations have been performed
before filing for concurso mercantil, and which knowingly intend to
defraud creditors if the third party involved in the act had
knowledge of such fraud (the latter not being a necessary
requirement in gratuitous acts). In general, these are acts performed
under disadvantageous conditions or conditions that are harmful for
the debtor, which were caused or aggravated by the situation of
insolvency in detriment of the majority of the creditors and with a
privilege or preference for one or several of them or for one or
several third parties.
Acts exist which the LCM defines as “are”, and others which are
“presumed as” (except for evidence otherwise), defrauding the
creditors.
Consequently, the LCM provides that the creditors “are” defrauded
by (i) gratuitous acts, (ii) acts and sales in which the debtor pays or
receives, accordingly, a consideration with a value clearly higher or
lower than that of its counterpart, (iii) operations performed in
terms that are significantly different to the conditions prevailing in
the market in which they have been performed or to trading
practices or uses, (iv) releases from debt or forgiveness made by the
merchant or debtor, (v) the undue payment of obligations made by
the merchant, or (vi) the discounting made by the Merchant of its
own effects, which is considered as an advance payment.
Regarding such acts, the declaration of ineffectiveness is
inadmissible when the Bankrupt Estate exploits the payments made
to the Merchant and, if the third parties return what they have
received, they may request the acknowledgment of their credits.
Additionally, the LCM provides that creditors are “presumed” to be
defrauded by the following acts, unless the interested party is able
to prove its good faith: (i) the granting of security or an increase in
existing security when the principal obligation did not contemplate
such security or increase; and (ii) the payment of debts made in kind
other than that stipulated. In the case of legal entities, the creditors
are presumed to have been defrauded by operations “against” the
Bankrupt Estate, similarly except when the interested party proves
its good faith, when they are performed with: (i) the director or
members of the board of directors or spouse, common-law wife or
common-law husband, blood relatives to the fourth degree or
relatives by marriage up to the second degree, as well as relatives
Abraham Gómez Velázquez
Alonso Rivera Gaxiola

ICLG TO: CORPORATE RECOVERY AND INSOLVENCY 2012WWW.ICLG.CO.UK
Mexico
174
Rivera Gaxiola y Asociados, S.C. Mexico
by civil relationship of the aforementioned persons; (ii) those
individuals who jointly or separately represent directly or indirectly
at least 51% of the capital of the debtor, have decision-making
powers in its meetings, are able to name the majority of the
members of its board of director or by any means have powers to
take the fundamental decisions of the debtor; (iii) those legal
entities in which coincidence exists between the directors or
principal managers thereof with those of the debtor or Merchant
subject to bankruptcy; and (iv) those legal entities controlled by the
merchant, which exercise control thereof or which are held by the
same person.
It is important to point out that the LCM establishes, as a sanction
for such class of acts, the indemnification to the Bankrupt Estate for
damages and losses only when “the asset” has been passed on to an
acquirer in good faith or has been lost, or when, in order to avoid
the declaration of ineffectiveness, the asset or assets subject to the
act of ineffectiveness have been destroyed or hidden, in virtue of
which it is deduced that when none of these circumstances or cases
has occurred, the sole consequence is the voidance or declaration of
ineffectiveness thereof and devolution, in the case of an object or
sum, as well as of its liquid products or interest corresponding to the
time during which it was enjoyed, in accordance with the original
agreement or legal interest.
In addition to the above, it should be indicated that even outside of
commercial bankruptcy proceedings, a civil action exists to attempt
to void acts with an intent to defraud creditors, called the Paulian
Action (an action by which creditors move to void all acts by which
a debtor defrauded them), which is established in the Federal Civil
Code and in the Civil Codes of each State of Mexico, which in
general is supported by the same conceptual base as the
ineffectiveness of acts performed by a debtor in order to knowingly
defraud, jointly with a creditor or third parties, its other creditors.
Such action has as its basic requirements that: (i) the insolvency of
the debtor results from the act branded as void; and (ii) the credit in
virtue of which the action is filed is prior to such act. In the case of
acts for valuable consideration, the voidance may only be declared
when both the debtor and the third party agree with it. Such
requirement is not applicable in the case of gratuitous acts. To this
regard, it is important to point out that, according to the general
nature of the aforementioned classifications, insolvency exists
when the sum of the assets and credits of the debtor, estimated at a
fair price, is not equal to the amount of its debts. To this effect,
mala fides consists of the knowledge of such deficit.
1.3 What are the liabilities of directors (in particular civil,
criminal or disqualification) for continuing to trade whilst a
company is in financial difficulties in Mexico?
Mexican legislation does not mention in any special section all the
sanctions for civil liability of the directors that are derived from the
continued operation of the company whilst it is in financial
difficulties. As a general rule, pursuant to Mexican Law, the civil
liability derived from an illicit act is created by whoever causes
harm to another, acting illicitly or against proper conduct, which
should be indemnified except when inexcusable blame or
negligence of the victim exists.
Consequently, civil liabilities will depend on the respective type of
company, corporation or partnership. In the case of stock
corporations, these include, but are not limited to, the following: (i)
liabilities for the damages and losses caused to the company due to
deliberating and deciding based on an interest opposed to the
interests of the company; (ii) liabilities derived from their power of
attorney, the law and the bylaws of the company; (iii) liabilities due
to appearing as joint and several obligors for and with the company
regarding the reality of the contributions made by the shareholders
or partners, regarding compliance with the legal and bylaw
requirements established with regards to the dividends paid to the
shareholders, regarding the existence and maintenance of the
accounting, control, registration, filing or information systems
stipulated by Law, and regarding the exact enforcement of the
resolutions of the Shareholders’ Meetings; (iv) liabilities due to
appearing as joint and several obligors with the directors who
preceded them due to the irregularities incurred thereby, if, being
aware thereof, they fail to report them in writing to the Statutory
Auditors; and (v) liabilities for possible dismissal derived from the
failure to submit the annual report on the financial position of the
company to the Shareholders’ Meeting.
For its part, the LCM contemplates certain offences when the
Merchant is in commercial bankruptcy proceedings, these being: (i)
a prison sentence of one to nine years due to any malicious or
fraudulent act or conduct that causes or aggravates the generalised
breach of its obligations, which will be presumed to occur when it
keeps its books in a way that makes it impossible to discover its true
financial position, or if it alters, falsifies or destroys such records;
(ii) a prison sentence of one to three years when required by the
bankruptcy Judge, due to failing to make its accounts available to
the person appointed by the Judge within the term granted thereto,
except when it is demonstrated that it was impossible to submit
them due to an act of god or force majeure; and (iii) a prison
sentence of one to nine years against whoever per se, or by means
of another person, requests the acknowledgment of a non-existent
or simulated credit in commercial bankruptcy proceedings. In the
case of legal entities, the criminal liability falls on the members of
the board of directors, the directors, managers or liquidators. With
regards to the reparation of the damage, such matter will be decided
by the bankruptcy Judge. All of the above, irrespective of the other
offences that may come within the scope of different Mexican legal
provisions, depend on the respective type of company.
2 Formal Procedures
2.1 What are the main types of formal procedures available
for companies in financial difficulties in Mexico?
Concurso Mercantil Proceedings. The Merchant may file for
voluntary concurso mercantil, with or without a prior restructuring
plan, or any creditor (including the tax authorities to this effect) or
the District Attorney’s Office may petition for involuntary concurso
mercantil.
2.2 What are the tests for insolvency in Mexico?
In order to be declared in concurso mercantil, the generalised
default or breach of payment of its obligations by the Merchant,
which consists of the breach of its obligations of payment to two or
more different creditors and the fulfillment of two conditions: the
first being that its due and payable obligations, which are at least 30
days overdue, represent 35% or more of all its obligations on the
date on which petition for declaration of concurso mercantil has
been filed for or requested; and the second being that the Merchant
is unable to cover at least 80% of its due and payable obligations on
the date on which bankruptcy has been filed for or requested, due to
not having (i) cash on hand and on-sight deposits, (ii) term
investments and deposits, the maturity date of which does not
exceed 90 calendar days following the date on which concurso
mercantil has been filed for or requested, (iii) accounts receivable
and customer deposits, the due date of which does not exceed 90

175
calendar days following the date on which bankruptcy has been
filed for or requested, or (iv) securities with which purchase-sale
transactions are regularly recorded in the respective markets, which
may be sold in a maximum term of 30 banking days, the valuation
of which is known on the date on which petition for declaration of
concurso mercantil is filed for or requested.
On the other hand, according to the Federal Civil Code and the
general text of the State Civil Codes, insolvency exists when the
sum of the assets and credits of the debtor, estimated at a fair price,
is not equal to the sum of its debts.
2.3 On what grounds can the company be placed into each
procedure?
If the Merchant voluntarily files for its declaration of concurso
mercantil, it will suffice for it to demonstrate that it meets any of the
indicated conditions so as to be declared in such state. In the case
that any creditor or the District Attorney’s Office requests it, the
fulfillment of the two aforementioned conditions should be proven,
although the debtor will be presumed to have generally breached its
obligations of payment when: (i) none or insufficient assets exist to
levy the execution of an attachment due to the breach of an
obligation or when attempting to enforce a judgment against it with
the authority of res judicata; (ii) a breach of payment exists of its
obligations to two or more different creditors; (iii) the debtor goes
into hiding or is absent without leaving anyone to front the
management or operation of the company who is able to perform its
obligations, or under the same circumstances, it closes its
company’s establishments; (iv) the debtor turns to ruinous,
fraudulent or fictitious practices to attend to or cease to perform its
obligations; or (v) it breaches its pecuniary obligations contained in
any agreement reached with its creditors in a bankruptcy
proceeding, or in any other cases of a similar nature.
The succession of the Merchant may be declared to be in concurso
mercantil when the company owned thereby continues to operate or
when its operations have been suspended and the actions of the
creditors have not been barred by the statute of limitations.
The declaration of concurso mercantil of a company determines
that the shareholders or partners with unlimited liability are
considered as such in concurso mercantil proceedings. The same
thing occurs regarding the partners or shareholders with unlimited
liability of an irregular company (those not entered in the Public
Commercial Registry and that have appeared as such to third
parties, whether or not they have been incorporated in a notarial
instrument).
Additionally, the concurso mercantil of holding companies and
their subsidiaries and those of two or more companies controlled by
the same holding company will be consolidated but settled
separately.
Finally, the branches of foreign companies may be declared to be in
concurso mercantil, which will only include the assets and rights
located and enforceable in Mexican territory and the creditors for
transactions performed with such branches.
2.4 Please describe briefly how the company is placed into
each procedure.
If it is the Merchant that files for concurso mercantil without a prior
restructuring plan, the day following the date on which the Judge
admitted it, a copy thereof should be sent to the Federal Institute of
Commercial Bankruptcy Specialists (Instituto Federal de
Especialistas en Concursos Mercantiles - IFECOM) –an auxiliary
body of the Federal Judicature Council, which designates the
Inspectors (“Visitador”), Mediators (“Conciliador”) and Receiver
(“Síndico”) in concurso mercantil proceedings and acts as the
consulting body thereof and of the courts responsible for the
application of the LCM with regards to the criteria of interpretation
and application of its provisions, among other powers– so that it
may appoint an Inspector, who will visit the Merchant under the
orders of the Judge, which has the purpose of determining, based on
the books, records and other documents of the Merchant, whether it
has met any of the conditions to declare it in concurso mercantil.
Once the Judge receives the Inspector’s opinion, it will be made
available to the Merchant so that the latter may make its arguments
and, if admissible, the judgment declaring the concurso mercantil
will be passed.
If the Merchant files for concurso mercantil with a prior
restructuring plan, meeting the indispensable requirements to this
effect, the Judge will pass judgment declaring it to be in concurso
mercantil, without the need to appoint an Inspector or for a visit to
the Merchant. As of the passing of the concurso mercantil
judgment, this proceeding will be treated as an ordinary concurso
mercantil, with the only exception that the Mediator should
consider the restructuring plan exhibited with the petition when
proposing any agreement.
If involuntary concurso mercantil is requested against the
Merchant, the same process will be followed as in voluntary
concurso mercantil without a prior restructuring plan, except that in
addition a term of 9 days will be granted thereto in which to answer
the complaint, offering the corresponding evidence. A term will be
given to the plaintiff along with such reply in which to make its
legal arguments and, if applicable, add evidence related to the
defence of the Merchant. The visit will also be made in this
proceeding.
The passing of the bankruptcy judgment has as its effects, among
other aspects:
(i) The declaration of opening of the Conciliation phase, with
one exception, which is when the Merchant files for
voluntary bankruptcy and explicitly requests that the
bankruptcy phase be opened.
(ii) The suspension during the Conciliation of any attachment or
enforcement order against the assets and rights of the
Merchant, except those of a labour-related nature.
(iii) The establishment of the retroaction date.
(iv) The initiation of the credit acknowledgment procedure.
(v) The ne exeat order against the Merchant (except when it has
filed for voluntary concurso mercantil). In the case of legal
entities, against the persons responsible for their
management, solely for the purpose of preventing them from
leaving the domicile without leaving a sufficiently instructed
and paid agent or proxy. Once the foregoing has been
demonstrated, the judge will raise the ne exeat order.
2.5 What notifications, meetings and publications are required
after the company has been placed into each procedure?
The judge should notify the judgment declaring the concurso
mercantil to the Merchant, to the IFECOM, to the Inspector, to the
creditors with a known address, to the tax authorities, to the District
Attorney’s Office (if it is the plaintiff), to the union representative
(if one exists and it is necessary) and, failing this, to the Labour
Rights Prosecutor.
Additionally, the Mediator will enter the concurso mercantil
judgment in the corresponding public registries and will publish an
extract thereof in the Mexican Official Gazette and in one of the
newspapers with highest circulation in the locality where the
proceeding is processed.
Mexico

Mexico
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Furthermore, the judge will give the following orders by
notification:
To the IFECOM: an order so that it appoints a Mediator.
To the Merchant: an order (i) so that it makes the books, records and
other necessary documents and resources available to the Mediator
to cover the expense of registration and the publications governed
by the LCM, (ii) so that it allows such specialists and the Receivers
(“Interventor”) to carry out their activities, and (iii) so that it
suspends the payment of the debts assumed prior to the effective
date of the concurso mercantil judgment, except those that are
indispensable for its normal operation, informing them to the judge
within the next 24 hours.
To the Mediator: an order (i) for the publication of an extract of the
concurso mercantil judgment in the Mexican Official Gazette and
in one of the newspapers with the highest circulation in the place
where the proceeding is processed, as well as its entry in the Public
Commercial Registry corresponding to the domicile of the
Merchant and in the places where it has agencies, branches or assets
subject to registration, and (ii) for the initiation of the credit
acknowledgement procedure.
Finally, the known creditors will also be notified so that those who
wish to do so request the acknowledgment of their credits and so that
a certified copy of the judgment is issued to those who request it.
3 Creditors
3.1 Are unsecured creditors free to enforce their rights in
each procedure?
Yes, any legitimate creditor may freely assert its rights in concurso
mercantil proceedings.
3.2 Can secured creditors enforce their security in each
procedure?
Yes, in accordance with the preference established by the LCM.
3.3 Can creditors set off sums owed by them to the company
against amounts owed by the company to them in each
procedure?
Yes, only: (i) the rights in favour and obligations against the
Merchant derived from the same operation and not interrupted in
virtue of the concurso mercantil judgment; (ii) the rights in favour
and obligations against the Merchant that have expired before the
concurso mercantil judgment and the compensation of which is
provided for by Law; (iii) the rights and obligations related to
repurchase transactions, securities loan transactions, futures or
spread agreements, derivative financial transactions, debts and
credits and credits resulting from master, regulatory or specific
agreements, made with regards to all of the above, in accordance
with the specific rules governed by the LCM; and (iv) tax credits in
favour and against the Merchant.
4 Continuing the Business
4.1 Who controls the company in each procedure? In
particular, please describe briefly the effect of the
procedures on directors and shareholders.
As a general rule, during the Conciliation phase the Merchant and,
in the case of legal entities, their directors and managers, and the
bodies responsible for taking decisions regarding them, will
continue in the management of the company, carrying out its normal
operations including the indispensable expenses for its normal
running under the supervision of the Mediator, who will decide on
the termination of pending contracts and approve, following the
opinion of the Receivers (if applicable), the contracting of new
credits, the establishment or substitution of security and the sale of
assets when they are not linked to the normal operation of the
company. However, if the Mediator deems it convenient for the
protection of the Bankrupt Estate, he may ask the Judge to remove
the Merchant from the management of the company and assume it,
in which case the powers of the bodies that, by Law or according to
the bylaws of the company, are responsible for taking decisions
about the directors or managers, will also be suspended.
4.2 How does the company finance these procedures?
Pursuant to the LCM and with the exceptions it expressly sets forth,
during concurso mercantil proceedings all provisions regarding
contracts, obligations and stipulations between the parties remain
applicable to the Merchant.
4.3 What is the effect of each procedure on employees?
The concurso mercantil judgment is not cause for interruption of
the payment of the ordinary labour-related obligations of the
Merchant.
4.4 What effect does the commencement of any procedure
have on contracts with the company and can the
company terminate contracts during each procedure?
According to Article 91 of the LCM, the declaration of bankruptcy
will not affect the validity of the contracts made over the property of
a strictly personal nature, not pertaining to equity, or related to assets
and rights that are inalienable, unattachable and indispensable.
Regarding contracts pending execution, be they preliminary or
final, these should be performed by the Merchant except when the
Mediator opposes them in benefit of the Bankrupt Estate. The
contracting party may ask the Mediator whether such opposition
will be made; if it does not exist, the Merchant should perform or
guarantee its performance, otherwise or if no reply is made within
the following twenty days, the contract may be terminated with the
notification to the Mediator to this effect.
With regards to purchase agreements, the vendor cannot be required
to deliver the goods that the Merchant may have acquired unless the
price is paid or its payment is guaranteed. The vendor may claim
the goods that it has delivered in compliance with a final agreement
not made in the way required by Law, but the claim will not be
admissible if the agreement is recorded in a reliable manner and the
Merchant, authorised by the Mediator, requires that the
corresponding legal form be given thereto or for any reason the
voidance action is extinguished due to a lack of proper form.
Deposit, loan, commission and agency agreements will not be
terminated, unless deemed by the Mediator.
Current account agreements will be terminated in advance and will
be placed in a state of liquidation in order to claim or cover their
balances, except when the Merchant, with the consent of the
Mediator, declares their continuation.
Repurchase agreements will be terminated in accordance with
certain rules established by the LCM (Article 102).

177
Regarding securities loan transactions guaranteed in Mexican
pesos, the same rules as apply to repurchases will be followed.
Those guaranteed with securities in Mexican pesos will be called in
and should be compensated.
Spread or future agreements and derivative financial transactions
will be terminated in advance on the date on which the bankruptcy
is declared and should be compensated.
Lease agreements will not be terminated except when the Mediator
chooses to terminate them, paying the lessor the indemnification
established in the agreement, if applicable, or, failing this,
compensation equivalent to 3 months’ rent.
Service agreements of a strictly personal nature will not be terminated
and the stipulations established between the parties will be observed.
Lump sum work contracts will be terminated, except when the
Merchant, with the authorisation of the Mediator, agrees to perform
the contract.
The concurso mercantil declaration of the insured party does not
rescind the insurance agreement if the insured property is real estate,
the insurer being able to rescind it in the case of chattel. In the case of
life or combined insurance, the Merchant, with the authorisation of the
Mediator, may decide to assign the policy and obtain a reduction in the
insured capital, in proportion to the premiums that have already been
paid. Similarly, any operation that implies a financial benefit for the
Bankrupt Estate may be performed.
In the case of partnership agreements of general partnerships or
limited liability companies, or of the general partner in a limited
simple or share-limited partnership, their liquidation may be
requested according to the last corporate balance sheet, or continue
in the partnership, with the consent of the Mediator, as long as the
other partners do not prefer to exercise the right of partial
liquidation of the partnership or other pact contained in the by-laws.
5 Claims
5.1 Broadly, how do creditors claim amounts owed to them in
each procedure?
Within 30 calendar days following the date of publication of the
concurso mercantil judgment in the Mexican Official Gazette, the
Mediator should submit a provisional list of credits against the
Merchant to the Judge, which may be opposed by the Merchant and
the creditors. Posteriorly, based on the provisional list and the
objections made, the Mediator will submit a final list of
Recognition of credits to the Judge. Once the above has been done,
the Judge will pass the Credits Recognition, Ranking and
Preference judgment, which may be appealed.
The creditors may request the recognition of their credits (i) within
twenty calendar days following the date of publication of the
concurso mercantil judgment in the Official Gazette, (ii) within the
term to oppose the provisional list (5 days), and (iii) within the term
for filing the appeal against the credits recognition, ranking and
preference judgment (9 days). In the case of foreign creditors, they
may request the recognition of their credits in 45 days. These
requests should be submitted to the Mediator and contain (i) the full
name and address of the creditor, (ii) the amount of the credit
against and, if applicable, in favour of the Merchant, (iii) the
guaranties, conditions, terms and other characteristics of the credit,
including the document evidencing it, (iv) the ranking and
preference that, in its opinion and by Law, corresponds to its credit,
and (v) the identification data of any administrative, labour, judicial
or arbitral proceedings that has been filed and is related to its credit.
In addition, duly signed using the forms established by the
IFECOM, the applicant should attach to the request the original
documents on which such request for recognition of credits is based
or a certified copy thereof and in the case of possessing such
information, it should state where they can be found and
demonstrate that it has begun the formalities to obtain them.
5.2 What is the ranking of claims in each procedure? In
particular, do any specific types of claim have preferential
status?
According to the nature of their credits, the LCM classifies
creditors with the following ranks:
(i) Singularly privileged creditors (whose preference will be
determined by the listing order), who are the holders of
credits derived from the burial costs of the Merchant and
from the expenses of the illness that has caused its death, in
both cases when the judgment is after its death.
(ii) Creditors with collateral, as long as their security is duly
established in accordance with the applicable provisions,
these being mortgages and pledges, who will receive the
payment of their credits from the product of the assets
attached to the security, with the absolute exclusion of those
creditors with a special privilege and unsecured creditors,
subject to the order determined in accordance with the
applicable provisions regarding the date of registration.
(iii) Creditors with special privilege, who are those that according
to the Commercial Law or the governing laws, have a special
privilege or a right of withholding, who will collect in the same
terms as those creditors with collateral or according to the date
of their credit, if it is not subject to registration, unless several
of them claim on a determined asset, in which case the
distribution will be made pro rata without a distinction of dates,
except when stipulated otherwise by Law.
(iv) Unsecured creditors, who are all those not considered as
singularly privileged, with collateral, with special privilege,
or work credits, other than those accrued in favour of salary
or wage workers produced in the last year (“Normal Work
Credits”), and for compensation. Unsecured creditors will
collect pro rata without distinction of dates.
With regards to the preferences in the payment of credits, the LCM
establishes the following:
Normal Work Credits and tax credits will be paid after covering the
singularly privileged credits and credits with collateral, but before
credits with special privilege. When the tax credits have collateral,
they will be paid at the same time as the payment to creditors with
collateral, up to the amount of their security.
No payments will be made to creditors of one rank without having
first liquidated those of the previous rank, according to the
preference established for them.
Similarly, the following are credits against the Bankrupt Estate and
will be paid in the indicated order and before the aforementioned
classification: (i) work credits accrued in favour of salary or wage
workers produced in the last two years; (ii) those contracted for the
management of the Bankrupt Estate by the Merchant with the
authorisation of the Mediator or Receiver or, if applicable, those
contracted by the Mediator; (iii) those contracted to cover normal
expenses for the security of the Bankrupt Estate, their financing,
conservation and management; and (iv) those derived from judicial
or extrajudicial procedures in benefit of the Bankrupt Estate.
5.3 Are tax liabilities incurred during each procedure?
The concurso mercantil judgment does not interrupt the payment of
the taxes or social security contributions of the Merchant, as they
are indispensable for the normal operation of the company.
Mexico

Mexico
178
As of the concurso mercantil judgment, tax credits will continue to
generate the corresponding restatements, fines and accessories, but
in the case of reaching a bankruptcy settlement, the fines and
accessories generated during the Conciliation phase will be
cancelled.
As of the bankruptcy judgment and until the end of the term for the
Conciliation phase, administrative procedures for the enforcement
of tax credits will be suspended but the tax authorities may continue
the necessary acts for the calculation and securing thereof.
6 Ending the Formal Procedure
6.1 Is there a process for “cramming down” creditors who do
not approve proposals put forward in these procedures?
Pursuant to the LCM, the bankruptcy agreement approved by the
Judge binds the Merchant, all the Recognised Unsecured Creditors, all
the Recognised Creditors with collateral or special privilege for whom
the agreement has stipulated payment (i) of the debt that was due and
payable to the effective date of the concurso mercantil judgment,
converted into Investment Units (UDIs) at the value on the date of the
concurso mercantil, (ii) of all the amounts and accessories that have
become due and payable according to the valid contract, from the date
of the declaration of concurso mercantil, to the date of approval of the
agreement, if bankruptcy is not declared and assuming that the amount
mentioned in point (i) has been paid on the date of the concurso
mercantil, and (iii) on the agreed dates, for the agreed amounts and in
the agreed denomination, of the obligations that, according to the
respective contract, become due and payable as of the approval of the
agreement, assuming that the amount mentioned in point (i) has been
paid on the date of the concurso mercantil judgment and that the
payments mentioned in point (ii) have been made when they became
due and payable. The payments referred to in points (i) and (ii) should
be made within 30 business days following the approval of the
agreement. If such provision is not made, those Recognised Creditors
with collateral who have not participated in the signed agreement may
initiate or continue with the enforcement of their guaranties.
6.2 What happens at the end of each procedure?
The proceedings ends when (i) an agreement is approved, (ii) full
payment has been made to the Recognised Creditors, (iii) payment
has been made to the Recognised Creditors by means of the
bankruptcy share of the obligations of the Merchant, and no more
assets are left to be realised, (iv) if it is demonstrated that the
Bankrupt Estate is insufficient, even to cover the preferential credits
over all others, (v) in the bankruptcy phase, when an agreement is
approved by the Merchant and all the Recognised Creditors, or (vi)
at any time when requested by the Merchant and all of the
Recognised Creditors. Once the bankruptcy proceedings have
ended, the bodies thereof will cease to perform their duties. In
addition, the Judge will order the Mediator to cancel the entries
made in the public registries in virtue of the concurso mercantil
proceedings.
7 Alternative Forms of Restructuring
7.1 Is it common to achieve a restructuring outside a formal
procedure in Mexico? In what circumstances might this
be possible?
Yes, as long as this is done under agreements made in accordance
with the corresponding applicable legislation and conditions that do
not contravene provisions of public interest that would lead to its
invalidity.
7.2 Is it possible to reorganise a debtor rather than realise its
assets and business?
Yes, by means of the agreement that the Merchant executes with its
Recognised Creditors during the Conciliation phase, which has a
duration of 185 calendar days, counted as of the date on which the
last publication of the concurso mercantil judgment is made in the
Mexican Official Gazette, extendable on two occasions for a period
of 90 calendar days, the first at the request of the Mediator or of the
Recognised Creditors (those who acquire such status in virtue of the
Credits Recognition, Ranking and Preference judgment) who
represent at least two thirds of the total amount of the recognised
credits, and the second at the request of the Merchant and of the
Recognised Creditors who represent 90% of the total amount of the
recognised credits, in both cases when they consider that the
making of an agreement is about to occur. In such phase, the
Mediator will procure that the Merchant and the Recognised
Creditors reach an agreement. If such Agreement is perfected and
is approved by the Judge under the conditions established by Law,
a judgment will be passed that approves it, which will end the
proceedings. If such Agreement is not perfected in the Conciliation
phase, or when the Merchant or Mediator so request (the latter
given the inability to make an agreement), the Judge will pass a
judgment declaring the Merchant bankrupt.
7.3 Is it possible to achieve an expedited restructuring of the
debtor by means of a pre-packaged sale? How is such a
sale effected?
There is no procedure governed by the LCM to this regard. It is not
possible to achieve a restructuring by means of a pre-packaged sale
as it would breach the nature of the concurso mercantil proceedings
itself as it is regulated by the LCM, which principal interest is to
conserve the company. It would also breach several principles of
public interest and prohibitions of the LCM.
8 International
8.1 What would be the approach in Mexico to recognising a
procedure started in another jurisdiction?
According to the LCM, acknowledgment will be granted to a
foreign proceeding when (i) it is a collective proceeding, whether it
is judicial or administrative, including that of a provisional nature,
pursued in a foreign State in abidance with a law related to
commercial bankruptcy, bankruptcy or insolvency of the Merchant
and in virtue of which the assets and businesses of the Merchant are
subject to the control or supervision of the Foreign Court, for the
purpose of its reorganisation or liquidation, (ii) the Foreign
Representative who requests the acknowledgment is a person or the
body, even one designated on a provisional basis, who has been
authorised in a foreign proceeding to manage the reorganisation or
liquidation of the assets or businesses of the Merchant to act as
representative of the foreign proceeding, (iii) the petition meets
certain requirements established by Law, and (iv) it has been filed
with a court with competent jurisdiction.

179
Alonso Rivera Gaxiola
Boulevard Manuel Avila Camacho 32
Floor 11
Lomas de Chapultepec, Mexico City
Mexico
Tel: +52 55 1084 1230
Fax: +52 55 1084 1239
Email: arivera@rgya.com
URL: www.rgya.com
Founding and senior partner of Rivera Gaxiola y Asociados, S.C.
Attorney by the Universidad Nacional Autónoma de Mexico. He
has extensive experience in civil, commercial, corporate and
administrative litigation, countrywide in Mexico and in national
and international arbitration.
Fluent in English.
AREAS OF PRACTICE: Civil, Commercial and Administrative
Litigation; International and Domestic Arbitration; Bankruptcies;
Financial Restructurings; Shareholders Controversies and
Disputes; Telecommunications, Aviation Law; Bonds and Bails;
Insurances; and Energy.
Abraham Gómez Velázquez
Boulevard Manuel Avila Camacho 32
Floor 11
Lomas de Chapultepec, Mexico City
Mexico
Tel: +52 55 1084 1230
Fax: +52 55 1084 1239
Email: agomez@rgya.com
URL: www.rgya.com
Partner of Rivera Gaxiola y Asociados, S.C. Attorney by the
Universidad Marista, in Mexico City. His professional practice
has focused mainly on civil and commercial litigation, as well as
corporate law.
He has more than 10 years of experience in commercial and civil
litigation countrywide in Mexico and has participated in judicial
disputes of shareholders controversies, bankruptcies and
insolvencies.
Abraham Gómez speaks English.
RIVERA GAXIOLA Y ASOCIADOS, S.C. is a law firm specialised in Commercial Law, Bankruptcies, Financial Restructurings,
Shareholders Controversies and Disputes, Corporate, Civil and Administrative Litigation, as well as in National and International
Arbitration. Our headquarters are located in Mexico City and in Monterrey, Nuevo León, México; we practice all over the country,
through our own staff and through strategic alliances and associations with local top firms countrywide.
Mexico
Boulevard Manuel Avila Camacho 32, Floor 11
Lomas de Chapultepec
Mexico City
Mexico
Tel: +52 55 1084 1230
Fax: +52 55 1084 1239
Condominio Torre Comercial América, floor 27-2701
Av. Batallón de San Patricio número 111
Valle Oriente, San Pedro Garza García, Nuevo León
Mexico
Tel: +52 81 5030 7583
Fax: +52 81 5030 7581

www.iclg.co.uk
59 Tanner Street, London SE1 3PL, United Kingdom
Tel: +44 20 7367 0720 / Fax: +44 20 7407 5255
Email: sales@glgroup.co.uk
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