Bankruptcies of state-owned companies

             The State may participate in the equity of a legal entity. If that legal entity was incorporated under mercantile laws, then it falls within the concept of merchant debtor. Hence, state-owned companies may be subject to bankruptcy proceedings. The problem arises in majority state-owned companies.

            Majority state-owned companies are part of the Federal Executive Branch in the parastatal division, that is, part of the government. Then, if “the government is always solvent”, how can a majority state-owned company be subject to a bankruptcy proceeding, which is triggered by a general default?

            Before the amendment of 2019, a provision permitted a state-owned company to be adjudicated in bankruptcy, but there was a debate raged on whether majority state-owned companies could be too. The 2019 amendment expressly provides that majority state-owned companies can be adjudicated in bankruptcy only when they are disincorporated from the Executive Branch.

            Relevant state-owned companies in Mexico are Exportadora de Sal, S.A. de C.V. (the largest salt company in the world, co-owned by Mitsubishi Corporation); Aeropuerto Internacional de la Ciudad de México, S.A. de C.V. (that operates the Mexico City International Airport, the busiest airport in Latin America); and Compañía Mexicana de Exploraciones, S.A. de C.V. (an important oil exploration company, co-owned by Schlumberger).[1]

            When the government amended the law in 2019, which state-owned company had in mind to free its way to bankruptcy?

            For further information about bankruptcy law in Mexico, my work “Bankruptcy Law in Mexico”, written in English, can be accessed at https://works.bepress.com/francisco-rodrigueznepote/4/, where it can be downloaded freely. A complete translation of the legal text can be found there, as well.

 


[1] A complete list of the state-owned companies in Mexico can be accessed at https://www.dof.gob.mx/nota_detalle.php?codigo=5598392&fecha=14/08/2020

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