Amendments to mexican reorganization and bankruptcy law
1. AMENDMENTS TO MEXICAN REORGANIZATION
AND BANKRUPTCY LAW
Published in the Official Journal on January 10th, 2014
2. The Amendments Seek To:
• Preserve the companies
• Provide legal tools to avoid abuses from
the parties or authorities
• Incorporate informational technology
(IT) mechanisms for more effective
proceedings
• Less discretion for the courts in regards
to procedural terms
3. 10 Fundamental Changes:
1.
2.
3.
4.
5.
6.
Benefits for creditors
Liability for the Board of Directors and employees
The concept of “imminent bankruptcy”
Changes in the legal term for “creditor’s fraud”
Less requirements for the reorganization stage
Modification in bankuptcy settlement agreements
and subordinated creditors
7. Prohibition to extend procedural terms and disposal
of assets
8. Electronic signature incorporated
9. Creation
of
consolidation,
collective
and
“emergency” credits
10. Increased criminal liabilities
4. 1. Benefits to Creditors
• One or more creditors may request the liquidation of the
company without exhausting the conciliation stage
• Protection to creditors and the estate during bankruptcy
proceedings
• Maximum disclosure of documents and information during
bankruptcy proceedings
• Protects personal data and all confidential information
5. 2. Liability for the Board of Directors and Employees
The members of
the Board of
Directors and the
employees of the
debtor will be
liable when they
cause property
damage
There will be joint
and several
liability for the
Board of Directors
and employees
involved in the
decision making
Board of Directors
and employees
involved in the
decision making
will be liable for
damages and lost
profits, and as a
result will be
removed from
their positions
There is no
possibility of
releasing the
Board of Directors
and employees
from liability
6. 3. The Concept of “Imminent Bankuptcy”
• The debtor may request bankruptcy when it is imminent that they are
unable to comply with their payment obligations up to ninety days
following the filing of their reorganization claim
7. 4. Changes to the Legal Term For “Creditor’s
Fraud”
• The burden of proof is significately reduced
• The judge may set as bankruptcy date a term of no more than 3
years if the application is submitted prior to the “creditor’s fraud”
stage
• It is not necessary to prove the existence of fraudulent acts in
order to proceed with the modification of the term “creditor’s
fraud”
8. 5. Less Requirements For The Reorganization Stage
• Once the initial term and, if applicable, its extension in the
reorganization stage elapses (which jointly may not exceed one year),
the judge will certify the conclusion of the stage declaring the debtor
insolvent
• The judge is not allowed to exceed such term
• The minimun number of creditors to request extensions in the
reorganizational stage is reduced
9. 6. Modification To Bankuptcy Settlement Agreements
And Subordinated Creditors
• Now it is possible to modify the
bankruptcy settlement agreement
• When a change in circumstances that
affects the compliance of the
agreement occurs, such modification
proceeds
• Any creditor may be able to request
the mandatory enforcement of the
bankruptcy settlement agreement
11. 7. Prohibition To Extend Procedural Terms
The judge shall guide the bankruptcy proceeding, but he may not
modify any term or period fixed by law unless he is expressly
empowered to do so (“Mexicana case”)
Disposal Of Assets
For the disposal of assets that are not related to
the ordinary operations of the company, the
conciliator will seek the best conditions of sale
12. Disposal Of Assets
The disposal of assets shall meet the following
aspects:
• Meet the ordinary business practices
• The conditions under which the operation is
conducted
• It is possible to group the assets into
packages that reduce terms and maximize
value
• May be entrusted to specialized third parties
13. 8. Electronic Signature Incorporated
• It is now possible to use electronic
signatures which will have the same legal
effect as handwritten signatures
Credits of the Debtor
• When the bankruptcy filing or once the
bankuptcy has been admitted, the judge
may authorize the immediate recruitment
of the credits that are necessary to
maintain the normal operation of the
company
14. 9. Creation of Consolidation,
“Emergency” Credits
Collective
and
The bankruptcy proceedings of companies that belong to the same
corporate group will be consolidated
Collective credits
• The legal representative of the
creditors will be able to apply for
the recognition of the credits
• Any creditor of a collective credit
will be enabled to appear
individually to request the
recognition of the credits
15. 9. “Emergency” Credits
These are necessary to maintain the normal operation of the companies
during bankruptcy proceedings.
10. Increase of Criminal
Liabilities
The debtor that is declared in
bankruptcy by final judgment, the
members of the Board of Directors,
the Sole Administrator, the General
Director, any relevant employee or
legal representatives of the debtor
shall be punished with imprisonment
from three to twelve years when they
commit intentional conduct that
aggravates the bankruptcy proceeding
16. These Amendments Have As A Purpose To:
1. Strengthen the rights of the debtors and creditors by introducing
new legal concepts in favor of more efficient proceedings
1. Avoid trials with indefinite terms in order to prevent proceedings like
“Mexicana de Aviación”
1. Maximizes the conservation of the companies with "emergency”
credits, "disposal of assets," among others
1. Adapts to the complexity of current business relationships
17. Luis Omar Guerrero R.
loguerrero@bstl.mx
Paseo de los Tamarindos 150 – PB,
Bosques de las Lomas,
05120 México D.F.
(55) 5091 0000
Omar Cuéllar G.
ocuellar@bstl.mx
Jorge Valdes K.
jvaldes@bstl.mx
Juan Arturo Dueñas R.
jaduenas@bstl.mx
Alejandra Domene S.
adomene@bstl.mx
Av. Ricardo Margáin 444
Torre Norte Mezzanine “A”
Valle del Campestre
66265 San Pedro Garza García, N.L.
