MEXICO Law and Practice Contributed by: Alejandro Sainz, Gabriela Avendaño and Daniel Pardo, Sainz Abogados
law. Mexican law provides that all rights and movable property can be pledged under a floating lien pledge – except for those rights that are strictly personal to their holder – which is the case of equity quotas (stock pledge). Execution Mortgages must be executed through a judicial proce - dure. Mexican law provides for a special procedure for the execution of mortgages. The procedure is divided into two phases: • the general phase, in which the creditor and the debtor file their evidence and pleadings; and • the execution phase, in which the property is finally sold to pay the debtor’s secured obligations. Pledges can be executed via a judicial or extrajudicial procedure. The extrajudicial execution procedure is optional and is ideal in cases where there is no contro - versy over the enforceability of the credit, its amount and the delivery of the property over which the pledge was created. The judicial procedure is similar to that of the mortgage, to the extent that the creditor must file a claim against the debtor for the judge to order the delivery and sale of the property to pay the credi - tor. The timelines for the execution of securities would depend on multiple factors, but obtaining a final order usually takes between 12 and 30 months. A creditor may foreclose on the collateral through the enforce - ment of its creditor’s rights and by following the spe - cial enforcement procedure applicable to the type of collateral granted in its favour (stock pledge, floating pledge over assets, mortgage, special mortgage over concessions, etc). Trusts In Mexico, a trust, known as a fideicomiso , gener - ally involves three principal parties: the settlor ( fide - icomitente ), the trustee ( fiduciario ), and the beneficiary ( fideicomisario ). Trusts are widely used in Mexico for a variety of purposes, including estate planning, secur - ing loans, managing business transactions and hold - ing property. The offer a flexible and secure method for managing and transferring assets while allowing for control, protection and specific conditions to be imposed. Additionally, the trust structure in Mexico benefits from legal certainty, as it is governed by
specific provisions of the General Law of Negotiable Instruments and Credit Transactions ( Ley General de Títulos y Operaciones de Crédito ), which provides clear guidelines for the establishment and operation of trusts within the country. The scope, terms and governing rules of a trust are very flexible, so it is legally possible to use a trust structure, as an SPV, to implement virtually any type of transaction, project, JV, financing or business, with different operational rules, rights and obligations, as the parties might agree depending on the scope of the business or project to be developed through the trust vehicle. Under any type of trust structure, a Mexican bank or financial institution (through its special trus - tee department) would act as the trustee ( fiduciario ), which is the party in charge of the implementation of the acts required to be followed as expressly provided in the clauses and governing rules of the trust or by following written instructions of a special committee (the “technical committee”) of the trust which serves as a type of management and supervisory board. Regarding trust agreements, the most common types are the following: • in a guarantee trust, the settlor transfers and assigns to the trustee (a Mexican bank acting in such capacity) real or personal property or rights, to guarantee payment of obligations in benefit of the beneficiaries thereunder; • in a source of payment and administration trust, certain assets (ie, accounts receivable against a third party) are transferred (assignment agreement) to the trust (represented by the trustee) to serve as source of payment of certain indebtedness (nor - mally of the settlor) derived from a loan agreement, according to a waterfall of funds to be provided in the trust agreement; and • in a securitisation trust, the assets (ie, accounts receivable) are transferred (assignment agreement notified to the debtor of the receivables) to the trust (represented by the trustee) and the trust issues debt instruments to be placed in a secondary market (commercial paper or cebures -securitised certificates).
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