Summary:
Commercial insolvency is – if nothing else – a protracted series of battles and bargains amongst the debtor, its creditors, and other stakeholders (i.e., principals, employees, regulatory agencies, investors, etc.). The objective of this extended contest is to extract the most potential value (or minimise the prospective loss) from the insolvency process – sometimes in collaboration with other participants, but just as often at others’ expense. The ‘rules’ of the contest are derived from the substantive law of those jurisdictions in which the debtor does business, and from the unwritten laws of the market.
In Mexico, as in many other Latin American countries, the substantive legal ‘rules’ affecting insolvency proceedings have undergone extensive change in recent years. In 2000, the Mexican legislature enacted a completely re-written Ley de Concursos Mercantiles (Law of Commercial Reorganisation) (‘LCM’), designed to eliminate many of the perceived problems with prior Mexican insolvency law. Likewise, the Codigo de Comerico (Commercial Code) and the Ley General de Titulos y Operaciones de Credito (Credit Transactions Law) underwent considerable amendment in 2000 and 2003, with the objective of enhancing creditors’ rights and, from a lender’s perspective, increasing the attractiveness of secured lending. Yet despite these changes, old ideas and customs – and old legislation – remain, and must be incorporated into the rapidly changing legal fabric of Mexican commerce.
Against this backdrop, how do debtors and their creditors resolve the potential disputes that commonly attend commercial insolvency in Mexico? To fully address this question would require a discussion well beyond the scope of the present article; however, the following very brief overview outlines some of the issues that arise when the Mexican debtor bargains with three of its most prominent Mexican creditor constituencies: labour, secured lenders, and taxing authorities.
This 2008 article is accessible here. Republished with kind permission of Chase Cambria Company (Publishing) Ltd.