MEXICO Law and Practice Contributed by: Alejandro Sainz, Gabriela Avendaño and Daniel Pardo, Sainz Abogados
2.4 Unsecured Creditors Under Mexican law, unsecured (trade) creditors have several rights and remedies available to recover defaulted debts outside a formal restructuring or insolvency proceeding. These remedies include the following. • Pre-judgment attachments – creditors can request pre-judgment attachments to secure assets of the debtor, which may be essential for safeguarding potential recovery in anticipation of a favourable judgment. • Retention of title – in some cases, creditors may retain title over goods supplied to the debtor until payment is fully made, thus preventing the debtor from disposing of the goods. • Set-off rights – under Mexican law, set-off can occur by operation of law without requiring a judicial declaration, allowing mutual debts between creditor and debtor to be offset against one another. The legal proceedings available will vary depending on the nature of the agreement and the specific cause of action. Once a favourable judgment is obtained, creditors can initiate attachment procedures to seize and sell the debtor’s assets to satisfy the debt owed. 3. Out-of-Court Restructuring 3.1 Out-of-Court Restructuring Process Many restructuring proceedings in Mexico begin as informal and/or consensual efforts but end in a judicial proceeding, depending on the specific circumstanc - es surrounding the negotiations and the status of the debtor. The possibility of aligning interests and posi - tions of different creditors is essential, as is the ability to reach a reorganisation agreement. It is likely that, if sophisticated creditors (banks, funds) are involved – which occurs in major restructurings – they will try to be co-operative to reach a reorganisation agreement that may serve to restructure the debtor out of court or prepare it for pre-pack, in-court proceedings (a more expeditious procedure than regular proceedings). Mexican law does not require mandatory consensual restructuring negotiations or reorganisation agree -
ments before the commencement of a formal statu - tory process. However, the Concursos Law provides that a debtor or a creditor can request IFECOM to appoint a conciliator to act as a mediator in order to achieve a consensual restructuring, 3.2 Legal Status Under Mexican law, there is no formal out-of-court restructuring proceeding that provides legal protec - tion to debtors, such as an automatic stay that would grant them a “breathing spell” while negotiating with creditors. This means that, outside of formal insol - vency proceedings, debtors are not shielded from enforcement actions or legal claims during restruc - turing talks. Furthermore, any agreement reached between the debtor and some of its creditors cannot be imposed on dissenting creditors, as the law does not grant the power to bind non-consenting parties. Therefore, any out-of-court financial restructuring is entirely dependent on the voluntary co-operation and agreement of both the debtor and its creditors to resolve the situation amicably. 4. Statutory Restructuring, Rehabilitation and Reorganisation Proceedings 4.1 Opening of Statutory Restructuring, Rehabilitation and Reorganisation The parties eligible to initiate a concurso proceeding include merchants, defined as natural persons or legal entities engaged in commercial activities, including trusts dedicated to such activities. Debtors within the same corporate group may simultaneously request a joint judicial concurso declaration without requir - ing consolidation of assets. For the joint concurso process, it is sufficient if one entity within the group meets the conditions of insolvency under the Concur - sos Law, provided this condition impacts one or more other group members similarly. A petition for insolvency or Concurso Mercantil in Mex - ico is commenced by (i) the company filing a voluntary concurso petition (voluntary petition), (ii) a creditor or other interested party filing an involuntary concurso lawsuit (involuntary petition), or (iii) the company filing
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