MEXICO Law and Practice Contributed by: Alejandro Sainz, Gabriela Avendaño and Daniel Pardo, Sainz Abogados
a pre-packed voluntary petition (pre-packed petition) with the support of a simple majority of its creditors. Upon the admission of the voluntary or involuntary petition by the Bankruptcy Court, the judge orders IFECOM to appoint an independent examiner. During the visita stage, the examiner reviews and audits the company’s books and records to determine whether the company satisfies the LCM’s insolvency require - ments to be eligible for Concurso Mercantil (the “Insol - vency Test”) The Insolvency Test focuses on whether the company has generally failed to comply with its obligations. Arti - cle 10 of the LCM provides that the Insolvency Test is satisfied when (i) the company has failed to comply with its payment obligations in respect of two or more creditors, (ii) 35% or more of all the company’s out - standing liabilities are 30 days overdue, and/or (iii) the company has insufficient liquid assets and receivables as established in the LCM (eg, cash, cash equiva - lents, and liquid securities) to support at least 80% of its obligations which are due and payable. In cases involving voluntary petitions, the company must sat - isfy the tests set forth in (i) and either (ii) or (iii) above to be declared insolvent. Alternatively, the company may satisfy the Insolvency Test if it can prove that it will be generally in default with respect to its payment obli - gations within 90 days from the filing of the voluntary petition. In cases involving an involuntary petition, the company must satisfy the tests set forth in each of (i), (ii), and (iii) to satisfy the Insolvency Test. 4.2 Statutory Restructuring, Rehabilitation and Reorganisation Procedure The LCM establishes a single insolvency proceeding ( Concurso Mercantil ) with two subsequent phases: a conciliatory phase of mediation between creditors and the debtor (known as the conciliation stage), and a second stage of bankruptcy or liquidation. Through a restructuring agreement, the purpose of the concilia - tory phase is to preserve the commercial enterprise as a continuing concern. The stated objective of bank - ruptcy, on the other hand, is to liquidate the business. Conciliation Upon the commencement of the conciliation stage, the company, IFECOM, and the examiner are served
with the concurso judgment. Creditors receive notice through a publication in the Official Gazette of the Federation ( Diario Oficial de la Federación ). A sum - mary of the concurso judgment in the Public Registry corresponding to the domicile of the company is also published. Additionally, the conciliator mails notices to identified creditors. The concurso judgment generally stays all acts of collection by creditors. Notably, however, entry of the concurso judgment does not necessarily stay all lawsuits involving the company; rather, it stays proceedings concerning the attachment of assets, enforcement decisions, and the execution of judg - ments against the company. Some exceptions may apply, including, for example, labour proceedings and those provided in the last paragraph of Article 65 of the LCM. The conciliator may approve any new credits, new collateral, or substitutions of the existing collateral and the sale of any assets when not related to the ordi- nary operation of the company subject to LCM rules aimed to protect the estate and rights of the creditors. In such approvals, the conciliator takes into account the opinion of any existing intervenors, who are inde - pendent individuals appointed by creditors and who represent the rights of creditors pursuant to the LCM. Preferred and senior financing may be granted for the administration of the estate or to maintain the ordinary course of business of the company and the liquidity required during the concurso proceeding, by following certain guidelines applicable to the conciliator. The conciliation stage is limited to 185 days; how - ever, the Bankruptcy Court may extend the term for up to two additional periods of 90 days each (for a maximum of 365 days). The first extension can be requested by the conciliator or recognised creditors that represent more than 50% of the total recognised debt. The second extension must be requested by the debtor and the recognised creditors that represent at least 75% of the total recognised debt. Bankruptcy/Liquidation In bankruptcy proceedings under the LCM, which are clearly collective proceedings, creditors have numer - ous rights, the most important of which are to:
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