MEXICO Law and Practice Contributed by: Alejandro Stamoglou, Jesús Pérez Alcántar and Julio Jiménez Manrique, Bello, Gallardo, Bonequi y García, S.C.
7. Bankruptcy and Insolvency 7.1 Impact of Insolvency Processes
• under Mexican law, obligations denominated in foreign currency may be discharged by paying the equivalent amount in Mexican currency at the exchange rate published by Bank of Mexico and in effect on the payment date; • the payment of compound interest (interest on interest) may be unenforceable under Mexican law; • claims may become time-barred under applicable statutes of limitation or may be subject to defenc - es, set-off, or counterclaims; and • service of process by mail does not constitute per - sonal service under Mexican law. Since personal service is considered a fundamental procedural requirement, a foreign judgment based on service by mail would likely not be enforceable by Mexican courts. 6.5 Timing and Cost of Enforcement A typical enforcement process in Mexico can take several years, as parties have the right to appeal deci - sions or judgments issued at each stage of the pro - ceedings under applicable law. Although enforcement actions for non-possessory pledges, security trusts, or promissory notes are designed to be expedited through summary proceedings ( juicio ejecutivo ), it is important to note that such actions are still or may be subject to judicial review, which can significantly extend timelines. The costs of enforcement may vary depending on the circumstances of each case; however, parties should anticipate expenses related to legal counsel, notary public or commercial broker fees and expert apprais - als ( peritos ). 6.6 Practical Considerations/Limitations on Enforcement As mentioned, following the judicial reform approved in 2024, which significantly changed the process for selecting judges and magistrates, parties have antici - pated potential uncertainty by including arbitration or mediation clauses in their contracts for dispute reso - lution. We expect this trend to continue as a way to mitigate risks related to judicial unpredictability. Other practical considerations and limitations are dis - cussed in 6.4 A Foreign Private Credit Lender’s Abil- ity to Enforce its Rights .
In Mexico, the only judicial insolvency proceeding is known as concurso mercantil , which consists of two successive stages: • conciliation ( conciliación ) – restructuring phase aimed at preserving the debtor’s business through an agreement with recognised creditors; and • bankruptcy ( quiebra ) – in which if no agreement is achieved, the process moves to liquidation, which involves selling the debtor’s business, its produc - tive units, or its assets to pay recognised creditors. Regarding the impacts of the commencement of insolvency process, under Mexican law, it is important to note that any provision in credit agreements that seeks to broaden the debtor’s obligations as a result of initiating insolvency proceedings may be deemed null and void. Upon the debtor’s declaration of insolvency, several legal effects take place, including: • all outstanding obligations of the debtor are deemed due and payable; and • secured claims, regardless of whether payment was originally agreed to occur in Mexico or abroad, will remain denominated in their original currency or unit of account and will only accrue the con - tractual ordinary interest, limited to the value of the assets securing them. For voting purposes under Mexican insolvency law, secured creditors’ claims are converted into UDIs as of the declaration date. They participate based on this amount, unless they request to be recognised for the collateral’s estimated value and as unsecured credi - tors for any shortfall. Regarding the “stay”, Mexican law provides that, from the issuance of the insolvency judgment and until the conclusion of the conciliation stage, all enforcement proceedings against the debtor are suspended, except for labour claims and tax claims. This means credi - tors cannot initiate or continue individual enforcement
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