[BANKRUPTCY, INSOLVENCY & REHABILITATION PROCEEDINGS IN MEXICO] 49
KEY FACTS OF BANKRUPTCY, INSOLVENCY & REHABILITATION PROCEEDINGS UNDER MEXICAN LAW Preface
In 2007, the CIL underwent several reforms, most importantly, the addition of a pre-packed reorganization proceeding and once again in 2014, the government issued the Financial Reform, by which, among other legislation, the CIL was reformed. One of the main purposes of this reform was to eliminate the existing legal gaps in the CIL that permitted the courts to interpret the regulation broadly according to each case. For example, in the bankruptcy proceeding of Compañía Mexicana de Aviación, a pioneer airline in the Mexican aviation industry, the judge illegally determined to extend the conciliatory term for over four years to procure a reorganization agreement, notwithstanding that, by law, this phase has a maximum duration of one year. Furthermore, this reform also introduced certain provisions that regulate intercompany debts to determine if the merchant is to be declared commercially insolvent or for the approval of the reorganization agreement between the merchant and its creditors. On August 9, 2019, the CIL was amended to incorporate provisions that would allow majority state-owned companies to request to be declared commercially insolvent or in bankruptcy. Additionally, on March 4, 2022, an order issued by the Council of the Federal Judicature was published in the Federal Official Gazette, stating the creation of two new Federal Courts specialized in attending insolvency proceedings
On 12 May 2000, the Commercial Insolvency Law (the “ CIL ”) was published in the Federal Official Gazette, and it entered into full force and effect the next day. This law replaced the 1943 Law governing the Suspension of Payments and Bankruptcy, and all other legal provisions that opposed the provisions of the new CIL. Pursuant to its preface, the CIL has the principal purpose of creating a modern regulatory framework that allows the conservation of companies undergoing a financial and economic crisis. To this end, the figure of ‘conciliation’ was created to make sure that the merchant and its creditors reach an agreement for the payment of the merchant’s liabilities over a reasonable period. If reaching a reorganization agreement is unfeasible, the CIL establishes a procedure for the orderly liquidation of the merchant’s assets and rights while attempting to maximize the proceeds of the sale, applying the funds obtained therefrom to the payment of the merchant’s liabilities, following a fair order and preference regarding the differences between the relevant creditors. The CIL maintains the federal judge as the central body and rector of the commercial insolvency proceeding; however, as previously stated, it recognizes that she or he must be aided in the performance of his or her functions by specialists in administrative, commercial, industrial, economic and financial aspects, so that the judge may focus efforts on strictly legal tasks. As a result, the CIL created the Federal Institute of Commercial Insolvency Specialists (widely known for its initials in Spanish as “ IFECOM ”). According to the indications of the CIL and the General Rules issued to this effect by this Institute, specialists are appointed by means of a random procedure.
ILN Restructuring & Insolvency Group – Bankruptcy, Insolvency & Rehabilitation Series
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