[BANKRUPTCY, INSOLVENCY & REHABILITATION PROCEEDINGS IN MEXICO] 60
commercially insolvent, the CIL allows the Merchant to request so, by stating under oath that it will imminently fall into a generalized non-compliance in the payment of obligations, presumed that any of said situations will inevitably occur within ninety days following the request. 2.- Verification Visit . To determine whether a Merchant is found within the premises contemplated by the CIL to be declared commercially insolvent, there is a preliminary stage within the insolvency proceeding named the “Visit”, in which an inspection is made of the financial and economic status of the Merchant (the “ Verification Visit ”) by a specialist called the “Visitor”, who is appointed by the IFECOM. The CIL stipulates that the Verification Visit will have a duration of 15 calendar days, which, at the request of the Visitor, may be extended by the Insolvency Court up to an additional 15 days. Based on the opinion submitted by the Visitor and considering the contents of the petition for the declaration of commercial insolvency, the Insolvency Court will determine whether the Merchant is declared commercially insolvent or not, by means of a ruling passed to this effect. If the Merchant refuses to facilitate the Visitor the financial information needed for the Verification Visit, the Insolvency Court will apply enforcement measures against the Merchant, giving warning that, if the Merchant's reckless conduct continues, the Merchant will be sanctioned by declaring it commercially insolvent. 3.- Conciliatory Stage. If the Merchant is declared commercially insolvent by the Insolvency Court, the conciliatory stage will commence in order for the Merchant and its acknowledged creditors to be in a position to reach an agreement regarding
the terms and conditions according to which the Merchant will repay its debts (the “ Reorganization Agreement ”). As indicated by the CIL, the initial term that the parties have to reach a Reorganization Agreement is 185 calendar days, which, under certain circumstances, may be extended by the Insolvency Court up to an additional 180 calendar days. The task of procuring that the Merchant and its acknowledged creditors agree on the terms of, and execute the Reorganization Agreement, is commissioned to a specialist called the “Conciliator”, who is appointed by the IFECOM; however, the CIL stipulates that a majority of creditors, with the Merchant´s consent, can appoint the Conciliator. During this stage, the Conciliator must prepare the list of creditors of the Merchant, and determine the amount, order, and level of preference of their respective credits. During the conciliatory stage, the Merchant (except in specific cases) will continue to manage its company and business under the supervision and, in some cases, requiring the explicit authorization of the Conciliator. 4.- Bankruptcy Stage. To the extent that the Merchant and its acknowledged creditors are unable to execute the Reorganization Agreement during the maximum conciliatory term of one year established by the CIL or, if the Merchant or its creditors file a bankruptcy petition and it ’s accepted by the Insolvency Court, the Merchant will be declared in bankruptcy. At such time, the objective of this stage shall become to sell all the assets and rights of the Merchant, in order to apply the proceeds thereof to the payment of the Merchant’s debts, in the order and preference established by the CIL.
ILN Restructuring & Insolvency Group – Bankruptcy, Insolvency & Rehabilitation Series
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