Restructuring and insolvency in Mexico: overview
A Q&A guide to restructuring and insolvency law in Mexico.
The Q&A gives a high level overview of the most common forms of security granted over immovable and movable property; creditors' and shareholders' ranking on a company's insolvency; mechanisms to secure unpaid debts; mandatory set-off of mutual debts on insolvency; state support for distressed businesses; rescue and insolvency procedures; stakeholders' roles; liability for an insolvent company's debts; setting aside an insolvent company's pre-insolvency transactions; carrying on business during insolvency; additional finance; multinational cases; and proposals for reform.
To compare answers across multiple jurisdictions, visit the Restructuring and insolvency Country Q&A tool.
This Q&A is part of the PLC multi-jurisdictional guide to restructuring and insolvency law. For a full list of jurisdictional Q&As visit www.practicallaw.com/restructure-mjg.
Forms of security
Common forms of security and formalities. The most common forms of security for immovable property are:
A real estate mortgage (hipoteca).
A guarantee trust.
A creditor with a real estate mortgage is treated as a secured creditor for insolvency purposes, and is entitled to satisfy its claim with the real estate on which the security has been created, or on that real estate's foreclosure. With a guarantee trust, the immovable property subject to the guarantee trust is not considered to form part of the insolvency estate on bankruptcy, and the title to that immovable property is deemed as validly conveyed and transferred in favour of the guarantee trust trustee.
A real estate mortgage and a guarantee trust must be executed in the form of a Mexican notarial instrument, and registered in the Public Registry of Property (Registry of Property) where the corresponding real estate is located. Registration is essential for both types of security to be effective against third parties. However, the mortgage and the guarantee trust will be valid and effective between the parties as from the date of execution of the security, even though it does not have any legal effect as against third parties until the date of registration.
The registration of a mortgage and a guarantee trust perfects the security and makes it enforceable against third parties. If properly recorded in the Registry of Property, in the event of insolvency:
A mortgage takes priority over all other credits (except for due wages from the previous two years and certain unpaid taxes).
The trust estate of the guarantee trust will be segregated from the debtor's insolvency estate.
Effects of non-compliance. Failure to register either a real estate mortgage or a guarantee trust renders them ineffective as against third parties (though they remain enforceable as against the parties to the security).
Common forms of security and formalities. The most common forms of security for movable assets are:
A traditional pledge (prenda).
A pledge with debtor in possesion (prenda sin transmisión de posesión).
A guarantee trust (fideicomiso de garantía).
The signatures of the parties to both types of pledge agreement and the guarantee trust must be ratified before a Mexican Notary Public. Further, to ensure the pledge is enforceable against third parties the agreement must be registered in the Public Registry of Commerce of the debtor's corporate domicile. A comprehensive list of the pledged assets must be attached to the pledge agreement. The pledged collateral must be physically delivered to the creditor or a depositary in the case of a traditional pledge.
Effects of non-compliance. Where the formalities are not complied with, the creditor will be considered an unsecured creditor in the case of insolvency. Secured creditors have a higher ranking than unsecured creditors for payment of their claims, and are also afforded other rights and remedies in the insolvency proceeding.
The collateral arrangements discussed above are available both to finance and trade creditors.
Creditor and contributory ranking
Under the Mexican Business Insolvency Law of 12 May 2000 (Ley de Concursos Mercantiles) (Insolvency Law), in the event of bankruptcy, payments will be made in the following order of priority:
Employee wages and other monetary benefits due to the debtor's employees accruing during the two years prior to the declaration of business reorganisation.
Expenses incurred in the management, preservation, custody and sale of the debtor's assets.
Expenses of the Insolvency Court.
Fees and expenses of the examiner, conciliator and receiver.
Burial expenses of the debtor (if applicable).
Labour debts (different from those mentioned above).
Debts in favour of creditors who have the right to withhold the debtor's assets or have other special privileges under Mexican law.
All shareholders (common and preferred stock) who would only have a right to receive any residual amount after all of the above debts have been paid.
Under the Insolvency Law creditors are ranked, depending on the nature of their claims, as either:
Singularly privileged creditors (that is, in the case of bankrupt individuals, claims such as alimony, funeral expenses, and so on).
Secured creditors (that is, creditors with a perfected security interest under Mexican law on certain assets).
Creditors with a special privilege.
Secured creditors have certain protections and preferential rights which are not afforded to unsecured creditors, including the following:
Secured creditors rank with a better priority than unsecured creditors for payment of their claims.
Secured claims are kept in the currency they are denominated in and continue to accrue interest up to the value of the assets they are secured with. Unsecured claims stop accruing interest as of the date that the Insolvency Court issues a declaration that the debtor is in fact legally insolvent (Insolvency Declaration) (see Question 6) and the outstanding amount of those claims denominated in Mexican pesos are converted to UDIS (Unidades de Inversión, which is a notional peso unit indexed by Mexican inflation). Unsecured claims denominated in foreign currency are first converted to Mexican pesos and then to UDIS.
Any binding reorganisation agreement between the debtor and its creditors (Restructuring Agreement) (see Question 6) must be approved, among others, by the secured creditors.
Secured creditors can continue a pre-filed foreclosure proceeding on their collateral after the declaration of the debtor's business insolvency (Concurso Mercantil), and have the right to be repaid out of the proceeds of the business insolvency after completion of the conciliation stage (see Question 6).
Where a debtor has mortgaged property in favour of a creditor, and the debtor becomes insolvent, the creditor can foreclose on the mortgage, using the proceeds of the sale to repay the outstanding debt without the need to obtain authorisation or consent from the other creditors. Where the proceeds of sale of the mortgaged property are not sufficient to cover the outstanding debt secured by way of mortgage, the creditor becomes an unsecured creditor with regard to any outstanding amount left unpaid.
An Insolvency Declaration does not, as a general rule, stop a pre-filed foreclosure procedure of a mortgage or security trust. However, the secured lender should file for acknowledgement of its claim before the Insolvency Court, or, where the foreclosure is already in process, it should notify the Insolvency Court of that foreclosure. In either case, judicial foreclosure will not be consolidated until the insolvency process is terminated.
Unpaid debts and recovery
Upon the declaration of a Concurso Mercantil creditors will not be able to create or perfect any additional encumbrance or security interest on the debtor's assets to secure their unpaid claims. Moreover, as a general rule with the declaration of insolvency the Insolvency Court issues a stay of all creditor actions relating to the property of the debtor's estate (including actions to collect pre-petition debt, to attach debtor's assets, to enforce liens securing such debt or to obtain possession of the property, including certain rights of the debtor's estate or from the estate). This does not include actions directed at collecting wages and other monetary benefits of the debtor's employees accruing during the two years preceding the Insolvency Declaration.
The automatic stay applies to all creditors, enjoining them from collecting outside the Insolvency Court. The Insolvency Court may take such steps as it deems advisable (or as recommended by the conciliator) to protect the integrity of the estate or a particular asset of the estate (including those granted as collateral). A secured creditor, at all times, has the right to request that action be taken to avoid any impairment that may be caused to their collateral due to debtor's liability or negligence. Such protection actions may include maintenance or repair of specific assets, hiring of insurance and other similar measures.
Also, the conciliator represents the interests of the creditors while overseeing the debtor's operations, including those related to the collateral. Secured creditors may also appoint an intervener (interventor) to represent their interests in the process and oversee the conciliator's performance, and supervise any acts carried out by the debtor in connection with their collateral.
The Insolvency Law provides for a special regime which applies to certain types of financial contracts, including:
Derivative transactions (operaciones financieras derivadas).
Repurchase agreements (operaciones de reporto).
Securities contracts (operaciones de préstamos de valores).
Future contracts (operaciones de futuros).
Other equivalent transactions.
Upon declaration of insolvency (Concurso Mercantil) (see Question 6) all of the financial contracts mentioned above which are outstanding will be deemed terminated as of the date the insolvency is declared, and must be closed-out (as applicable) and netted.
The close-out, liquidation of collateral (as applicable under derivative transactions) and netting must be carried out in accordance with the derivative transaction documents and does not form part of the Concurso Mercantil proceeding. Provided that the relevant collateral arrangement is not deemed as a fraudulent conveyance, the collateral will not form part of the insolvency estate. If the relevant agreement does not specifically provide a close-out (as applicable) and netting mechanism, then the value underlying the properties or obligations in the agreement will be determined at their market value on the Concurso Mercantil declaration date, to offset those amounts. The Insolvency Court will acknowledge creditor's rights to close-out and net. However, the Insolvency Law does not provide for a specific time to exercise that right.
Rescue and insolvency procedures
Under the Insolvency Law there is a single insolvency proceeding (Concurso Mercantil). Insolvency proceedings are controlled by Federal District Courts (Juzgado de Distrito) with jurisdiction in the debtor's domicile. The insolvency proceeding consists of two stages:
The conciliation stage.
The liquidation stage.
Each stage is supervised by the Federal Institute of Specialists in Business Insolvency (Instituto Federal de Especialistas de Concursos Mercantiles) (IFECOM).
Objective. The purpose of the conciliation stage is to encourage a Restructuring Agreement, effectively avoiding the debtor's bankruptcy.
The conciliation stage is initiated once the relevant petition is filed before the Insolvency Court. Provided the petition meets the initial filing requirements, the Insolvency Court admits the petition and sets a hearing date (usually not later than ten days from the filing date) to determine whether the request for insolvency protection should be granted or not. Upon admitting the petition, the Insolvency Court must send a copy to the IFECOM, so that IFECOM can appoint an examiner (visitador).
The examiner must report whether or not the debtor is in fact insolvent to the Insolvency Court. The Insolvency Court must then determine whether the debtor is actually insolvent within 15 days of receiving the examiner's report. If the Insolvency Court resolves that the debtor is solvent, the Concurso Mercantil proceeding ends. If it resolves that the debtor is in fact legally insolvent, it will issue an Insolvency Declaration (Sentencia de Concurso).
The Insolvency Declaration is subject to appeal by the debtor and/or the creditors. A copy of the Insolvency Declaration must be sent by the Insolvency Court to IFECOM, so that IFECOM can appoint a conciliator (conciliador), at which point the conciliation stage will begin.
The last amendment to the Insolvency Law (December 2007) also allows companies to file a "pre-package plan" business reorganisation. This provides a simplified proceeding that allows the court to issue an Insolvency Declaration based on a Restructuring Agreement that has the approval of creditors holding at least 40% of the company's outstanding indebtedness. This eliminates the requirement for an examiners' assessment of the company's books and accounting records before the judge can declare the company in Concurso Mercantil. As described below, it also allows the Restructuring Agreement to be approved during the liquidation stage.
The Insolvency Declaration must establish that the debtor is in general default of its payment obligations, and must include a provisional list of creditors identified in its accounting records, indicating the amount owed to each of them. The Insolvency Declaration will also order the conciliator to:
Register the Insolvency Declaration with the corresponding Registry of Property.
Publish the abstract of its contents in the Federal Official Gazette and in a widely circulated newspaper, and begin the process of identifying creditors.
During the conciliation stage the conciliator will attempt to encourage a Restructuring Agreement among the debtor and its creditors. For the Restructuring Agreement to be valid, it must be:
Approved by the debtor.
Approved by more than 50% of:
the recognised claims of all unsecured recognised creditors; and
the recognised claims of all secured or preferential creditors.
However, a simple majority of recognised creditors (regardless of the amount of their claims) can veto any Restructuring Agreement. In order for the Insolvency Court to approve any Restructuring Agreement it must determine that the agreement:
Treats all creditors within the same class equally.
Does not contravene public policy.
Meets all requirements under the Insolvency Law.
If a Restructuring Agreement is reached and approved by the Insolvency Court, the Concurso Mercantil proceeding ends.
The second stage of Concurso Mercantil is the liquidation stage, which takes effect where a Restructuring Agreement is not approved by the debtor and its creditors at the end of the conciliation stage. The aim of this stage is to sell the debtor's assets to pay the creditors. However, during this stage a Restructuring Agreement may still be approved provided that all creditors together with the debtor and the Insolvency Court approve such agreement. The liquidation stage starts with the Insolvency Court declaring the debtor bankrupt. Bankruptcy ends with the liquidation of the debtor's assets for the benefit of its creditors in accordance with their respective rankings and privileges.
Initiation. The conciliation stage can be started when the relevant petition is filed before the Insolvency Court by either:
The District Attorney (Ministerio Público).
The declaration of bankruptcy can only be made:
At the debtor's request during the Concurso Mercantil.
Upon the expiration of the conciliation stage (this stage lasts for 185 days, and can be extended a maximum of two times by 90-day periods if the Insolvency Court has not approved a Restructuring Agreement).
At the conciliator's request (this can be made before the expiration of the conciliation stage and the time periods mentioned above).
Any debtor ("merchant" or "comerciante" as defined under the Commerce Code) can be subject to a Concurso Mercantil. Insolvency proceedings for credit institutions are governed by the Insolvency Law to the extent it is not contrary to special provisions. The process for banks can only be initiated by the Institute for the Protection of Bank Savings (Instituo para la Protección del Ahorro Bancario (IPAB)) or the National Banking and Securities Commission (Comisión Nacional Bancaria y de Valores (CNBV)). The process for ancillary credit institutions can be initiated by:
Any creditor of the ancillary credit institution.
The District Attorney.
Substantive tests. Under the Insolvency Law, the examiner must determine if a debtor has generally defaulted in paying its obligation by failing to pay two or more of its creditors. In addition, one of the following criteria must also be met if the petition is filed by the debtor:
Payment obligations overdue for at least 30 days account for more than 35% of the debtor's payment obligations.
The debtor has an insufficient amount of the following liquid assets to meet at least 80% of its overdue payment obligations:
cash on hand and demand deposits;
term deposits and investments maturing in no more than 90 calendar days following the date on which the request for business reorganisation is made;
customers and accounts receivable maturing in no more than 90 calendar days following the date on which the request for business reorganisation is made; and
any securities for which purchase and sale transactions are regularly carried out in the relevant markets, that can be realised within a maximum 30-banking-day term, and whose value as of the filing date for the business reorganisation is known.
If the petition is filed by a creditor or any other entity other than the debtor, then all of the criteria above must be met.
Supervision and control. Once the petition is admitted, the Insolvency Court must send a copy to IFECOM, so that IFECOM can appoint an examiner. The examiner will access and review the debtor's accounting books, records and financial statements, as well as any other of the debtor's documents or electronic data containing financial and accounting information. The conciliator can also interview the debtor's executive, managing and administrative staff, including the debtor's external financial, accounting or legal counsel. During this stage, the conciliator supervises the administration of the debtor's business.
Once in liquidation, the administration of the debtor's assets is turned over to a receiver (síndico), who can elect to continue or discontinue the debtor's business pending final liquidation. The receiver must provide a status report to the Insolvency Court every two months.
Protection from creditors. During the Concurso Mercantil proceeding, the Insolvency Law affords the following protections to creditors:
The Insolvency Court can adopt measures that safeguard the debtor's assets for the creditors' benefit and insure that no actions are taken outside the ordinary course of business.
The creditors have certain rights to control and oversee the process, for example:
the creditors representing 10% or more of all recognised claims can appoint an intervener (interventor), who will represent creditors' interests in the process, oversee the conciliator or the receiver and supervise any acts carried out by the debtor;
the creditors (along with the debtor) have the right to remove and appoint the receiver.
Length of procedure. The conciliation stage should not exceed 185 calendar days, although that period can be extended up to a maximum of two 90-day periods provided:
The first extension is approved by the conciliator and creditors representing at least two-thirds of the total recognised claim amount.
The second extension is approved by the debtor and creditors representing at least 90% of the total recognised claim amount.
In any event, the conciliation stage cannot last for more than 365 calendar days.
There is no specific time frame for pre-package plans, though once it is declared, the provisions of the conciliation stage apply.
The liquidation stage does not have a time frame. Liquidation continues until no assets are left, and can be restarted by any creditor every time the debtor receives new assets.
Conclusion. The conciliation stage concludes either:
When the Restructuring Agreement is reached and the Insolvency Court issues a resolution approving that agreement.
When the Insolvency Court orders the liquidation stage to begin.
The Insolvency Declaration has the following effects (among others) on the debtor's assets:
Automatic stay. It suspends the enforcement of legal actions against a debtor's assets, except for those concerning the collection of wages and other monetary benefits which accrued to the debtor's employees during the two years preceding the Insolvency Declaration.
Suspension of payments. It suspends any payments being made which arise from the debtor's obligations that existed on the date of the Insolvency Declaration, other than payments considered necessary for the debtor's ordinary course of business (which must be notified to the Insolvency Court).
Segregation of assets. The following assets can be segregated from the debtor's insolvency estate:
those in the debtor's possession but owned by a third party (including those leased by the debtor by virtue of a lease or a non-true lease agreement which has not been affirmed by the conciliator);
assets not fully paid by the debtor (other than real estate already duly recorded under its name without any ownership limitations);
securities owed as payment of sales on the account of third parties;
taxes retained or otherwise collected by the debtor on account for the Mexican tax authorities;
other assets in the debtor's possession as depositary, in consignment, in transit, held for delivery to a third party or not otherwise owned by the debtor.
The company shareholders, employees and trading partners are subject to the terms and conditions of the approved Restructuring Agreement.
The liquidation stage ends with the sale and liquidation of the debtor's assets for the creditors' benefit in accordance with their respective rankings and privileges.
For insolvency procedures, see Question 6.
In addition to the judge, the most significant roles which influence the outcome of an insolvency proceeding are the conciliator (during the conciliation stage) and the receiver (during the liquidation stage). They are responsible for supervising, handling, and, in some cases, administrating:
The debtor's business.
The negotiations with creditors.
Likewise, during the conciliation stage, the debtor, the secured creditors and the creditors representing the majority play a very important role by carrying out the negotiations for the restructuring plan, and ultimately vote to approve the Restructuring Agreement.
A director of an insolvent company who engages in any malicious act or conduct which causes the non-performance of the company's payment obligations is liable to criminal prosecution and/or civil actions. However, if the company has not been declared insolvent the directors may not be liable.
It should be noted that substantive consolidation does not apply under a Concurso Mercantil in Mexico. Under the Insolvency Law, the Concurso Mercantil of two or more subsidiaries, or of a subsidiary and its parent company, are handled by the same judge but processed under a separate docket. Lenders to a subsidiary would only be able to access assets of another subsidiary (or its parent company) if the payment obligations of the insolvent subsidiary are guaranteed by that other affiliate.
Setting aside transactions
Under the Insolvency Law, the following acts can be set aside if they occur during the "look-back period":
Acts which constitute a fraudulent conveyance.
Acts which have a general iuris tantum (prima facie) fraudulent conveyance presumption.
The "look-back" period commences 270 calendar days prior to the Insolvency Declaration date, but this period can be pushed back by the Insolvency Court.
Acts that constitute a fraudulent conveyance are those acts:
Entered into without appropriate (market) consideration.
Significantly differing from market practices and arm's length basis.
Where undue payment obligations are satisfied, forgiven or set-off.
The following acts can be presumed to be a fraudulent conveyance (unless the parties evidence that they have acted in good faith):
New liens are created, or existing liens are increased (which were not contemplated in the original transaction).
Payments in kind are made (which were not contemplated in the original transaction).
The relevant transaction is entered into with any affiliate or related party of the entity deemed to be insolvent.
Any act declared a fraudulent conveyance by the Insolvency Court will not be effective and will be set aside by the Insolvency Court.
With regard to the debtor's pending obligations, the Insolvency Law provides for certain specific rules set out below:
Purchase agreements. Purchase agreements which have been perfected and properly booked and recorded (if applicable) cannot be terminated until the price of each is paid in full.
Revolving accounts. Any of the debtor's revolving accounts will be terminated unless the conciliator opposes that termination.
Lease agreements. The Insolvency Declaration does not terminate lease agreements. However, in the event the debtor is the lessee and has been declared insolvent, the lessor is entitled to terminate the lease agreement and to collect a penalty equal to three months' rental payments.
Lump sum construction agreements. The Insolvency Declaration of a debtor party to a lump sum construction agreement causes the termination of that agreement.
Insurance. Insurance companies can terminate the insurance on personal (as opposed to real estate) assets from the date on which the insured person or company is declared insolvent. Any insurance on the debtor's assets will be terminated in the event the conciliator does not notify the corresponding insurance company of the Insolvency Declaration of the debtor within 30 days following the date of that declaration.
Carrying on business during insolvency
During the conciliation stage, the debtor maintains management of the business, unless the conciliator requests (from the Insolvency Court) the removal of the debtor in order to protect the pool of assets. In the event the debtor holds the management of the business, the conciliator is obliged to:
Supervise the accounting and all transactions performed by the debtor.
Decide if any existing agreements binding on the debtor must be terminated.
Approve, with the prior opinion of the interveners appointed by the creditors:
new credits in favour of the debtor;
the creation of new security interests;
the substitution of any existing security interests;
the sale of any assets not involved in the ordinary course of business of the debtor.
Call the board or any other of the debtor's decision-making governance bodies to discuss and approve any matters relating to the debtor's business.
In the event that the debtor is removed from the management of the business, the conciliator becomes the administrator and is granted full authority to conduct the business, on the understanding that the debtor's corporate authority ceases, and its decision-making governance bodies refrain from management. The conciliator can also request that the Insolvency Court suspend the debtor's operations in the court if the pool of assets is at risk, or there is likelihood of an increase in the debtor's liabilities.
During the liquidation stage, it is implied that the debtor's management is under the receiver's administration. The receiver begins the measures necessary to occupy the debtor's property and place of business, and draw up an inventory. Even if the recognition of credits has not been concluded, the receiver will begin to alienate the property and rights that comprise the estate. However, the debtor retains the management and control of any assets that, under Mexican law, cannot be disposed or attached and are not subject to the statute of limitation (for example, certain governmental concessions and contracts).
The conciliator has the authority, with the approval of the Insolvency Court, to supervise or carry on the debtor's business. Once in liquidation, the administration of the debtor's assets is turned over to the receiver, who can elect to continue or discontinue the debtor's business pending final liquidation.
Intellectual property licences
The Insolvency Law does not contain specific provisions concerning intellectual property licence agreements and so the general rules apply. During the conciliation stage, in assessing which payments are required for the debtor's ordinary course of business, the conciliator must determine which contracts should be assumed or rejected for the court to approve payments on. The conciliator can also be asked by a relevant counterparty to approve that a contract is assumed or rejected. Where the conciliator does not provide an answer within 20 days, this is assumed to constitute a rejection of the relevant contract. The conciliator must approve that a contract be assumed, and this decision is based on whether that contract is necessary for the debtor to continue with its day-to-day operations.
A debtor can obtain post-petition financing subject to the conciliator's approval, and that financing can be secured or unsecured. Post-petition financing will have a better ranking and priority than any pre-petition claim, as it is considered as a financing in favour of the insolvency estate, provided that any such indebtedness is incurred to cover either:
Wages and other monetary benefits in favour of the debtor's employees accruing during the two years prior to the Insolvency Declaration.
Costs associated with the management of the insolvency estate.
Expenses and costs associated with the repair, maintenance, conservation and management of the insolvency estate assets.
Judicial or extrajudicial proceedings for the benefit of the insolvency estate.
Any person or agency (Foreign Representative) that has been authorised in a foreign proceeding to handle the reorganisation or liquidation of the debtor's properties or businesses, or to act as representative for the foreign proceeding, can request that the Insolvency Court recognise the foreign proceeding in which it was appointed. For the purposes of the Insolvency Law, foreign proceeding means the collective proceeding, whether judicial or administrative (including any provisional proceeding) being processed in a foreign state under a law regarding the debtor's business reorganisation, bankruptcy or insolvency, under which the debtor's properties and businesses are subject to the control or monitoring of a foreign court, for the purposes of reorganisation or liquidation.
If the recognition of a foreign proceeding is filed with respect to a debtor which has an establishment in Mexico, that debtor will be subject to inspection (by the examiner) and any provisional remedies will be available under the Insolvency Law. The business reorganisation process will be governed by the Insolvency Law.
If the debtor does not have an establishment in Mexico, the proceeding will take place directly between the Foreign Representative and the debtor and will be processed as an ancillary proceeding.
A foreign proceeding will be recognised if:
It is deemed a foreign proceeding under the Insolvency Law.
The Foreign Representative that requests recognition is deemed a Foreign Representative under the Insolvency Law.
The petition requesting the recognition complies with the Insolvency Law and is filed in Mexico with the competent court.
A foreign proceeding can be recognised as:
A "principal" foreign proceeding if it is being processed in the state where the debtor has its principal place of business.
A "non-principal" foreign proceeding, if the debtor only has an establishment (as opposed to its principal place of business) in the territory of the state of the foreign venue.
From the date when the petition for the recognition of a foreign proceeding is filed, the Foreign Representative must inform the judge:
Of any major change in the status of the recognised foreign proceeding or in the appointment of the Foreign Representative.
Of any other foreign proceeding which is being pursued in connection with the same debtor of which the Foreign Representative is aware.
From the date when the petition for the recognition of a foreign proceeding is filed, and until that petition has been resolved, the judge can, upon request of the examiner, the conciliator or the receiver (on the Foreign Representative's behalf) and whenever such measures may be necessary and urgent to protect the debtor's properties or the interests of the creditors, order the following provisional remedies (amongst others):
The suspension of any enforcement action on the debtor's properties.
The appointment, by the person appointed by the IFECOM, of the administrator or manager (who could also be the Foreign Representative) of all or a part of the debtor's assets located in Mexico, in order to protect and preserve the value of any goods which, due to their nature or concomitant circumstances, may be perishable, subject to depreciation or otherwise threatened.
Upon recognition of a "principal" foreign proceeding:
Any enforcement action on the debtor's properties will be suspended.
The right to transfer or encumber the debtor's properties and to dispose otherwise of those properties will be suspended.
At any time, if necessary to protect the debtor's properties from the creditors' interests, the Foreign Representative can:
Urge the examiner, the conciliator or the receiver to request the judge to order a proper remedy for such purposes, or to be entrusted or to entrust any other person designated by IFECOM with the distribution of all or a part of the debtor's properties located in Mexico, provided that the judge confirms that the interest of Mexican resident creditors are sufficiently protected.
Ask the examiner, the conciliator or the receiver to start any action to recover the estate properties and to declare null and void any fraudulent acts against creditors.
The Insolvency Law contains a chapter on international procedural co-operation with regards to insolvency proceedings. In general terms, in the event that a foreign proceeding and a proceeding in Mexico are being concurrently processed in connection with the same debtor, the competent judge in Mexico can recognise the existence of the foreign proceeding of a foreign debtor under the laws where the respective proceedings are taking place and under the laws of Mexico. This co-operation also includes obtaining precautionary measures against a debtor, in effect preventing the alienation of property, suspending any execution measure against the debtor's property, and determining an administrator or executor for all or part of the foreign debtor's property which is on national territory. As part of the international procedural co-operation, the judge must recognise the legitimacy of the bodies designated in the foreign insolvency proceedings (for example, the trustee in insolvency and similar figures). The judge is also empowered to impose document certification requirements.
Mexico is not a party to any international treaties concerning insolvency. However, the Insolvency Law is based on the UNCITRAL Model Law on Cross-Border Insolvency 1997 (UNCITRAL Model Insolvency Law) and the World Bank Effective Insolvency Systems: Principles and Guidelines.
Procedures for foreign creditors
The procedures for foreign creditors are the same as for domestic creditors under the Insolvency Law.