Foreign creditors in Mexican Bankruptcy proceedings.

 

Foreign creditors have the same rights and opportunities as the national creditors before a bankruptcy proceeding in Mexico, although there are some exceptions.

Creditors are a key factor in bankruptcy. The following is an initial and broad distinction of creditors.

          a. Generic creditors. During the pre-bankruptcy proceeding, generic creditors do not participate; only the debtor and the visitor take part in voluntary petitions; and the debtor, the visitor, and the plaintiff (whether a single or group of creditors or the Fiscal Attorney) participate in involuntary petitions. After the bankruptcy adjudication but before the ruling on the allowance of claims, those acting as creditors may participate in the bankruptcy as generic creditors. The generic creditors have the following rights and powers:

1. They have access to the judicial record, the annexes that the debtor submitted with the voluntary petition, the visitor’s report, the bi-monthly reports presented by the reorganization and liquidation officers to the court, the appraisals submitted by the reorganization or liquidation officers, if applicable, and finally, any other document submitted to the court.  

2. To submit their proof of claims, to lodge an objection to the provisional list of claims, and to appeal the first instance ruling on the allowance of claims.

3. To pay for the publication of the bankruptcy adjudication in the Federal Official Gazette if the debtor fails to do so.

4. To challenge the appointment of the reorganization officer or the liquidation officer.

5. To inform the court of any misconduct of the reorganization or liquidation officer.

6. To request the court to appoint a representative.

          7. To request an extension of the retroactive date.

          8. To request the setting aside of fraudulent conveyances.

9. In cases of a pre-package petition, to appoint, with the debtor, a reorganization officer.

10. To meet with the reorganization or liquidation officer.

11. To press charges for criminal offenses against the debtor.

 

b. Allowed creditors. Allowed creditors are those that acquire such nature by the judgment on the allowance of claims. Allowed creditors have, in addition to the rights of generic creditors, the following rights and powers:

          1. To sign, vote on, or veto the reorganization plan.

2. To request, with the debtor, an extension of the period for submitting a reorganization plan.

3. To institute a liability action against those that committed fraudulent conveyances.

4. To request an amendment of the reorganization plan.

5. To request the compulsory enforcement of the reorganization plan.

6. To appoint, with the debtor, a reorganization or liquidation officer.

7. To appeal the ruling that converts the bankruptcy from the reorganization stage to the liquidation stage.

8. To bid in auctions for the debtor´s estate.

9. To veto the permission for the liquidation officer to sell the assets out of auction.

10. To veto an offer made by any interested party in the liquidation stage.

11. To receive payment from the proceeds of the liquidation of the debtor’s assets.

12. To appeal the ruling on the conclusion of the bankruptcy proceeding.

          Foreign creditors have the same rights and powers as those mentioned before, whether as a generic creditor or allowed creditor.

          The special and differentiated treatment to the foreign creditors derives from the manner of notification and the opportunity to submit proof of claims.

          I.- Notice to creditors. The bankruptcy adjudication will be notified, in addition to the debtor, to the Insolvency Institute and visitor, to the union representative or the Labor Defense Attorney and the creditors personally, through the court’s clerk, by certified mail or other means established by law. Any creditor not notified through such means is regarded as notified through the publication in the Federal Official Gazette of the summary of the adjudication resolution.

          In the case of foreign creditors, following the UNCITRAL Model Law on Cross-Border Insolvency, the notification will not take place through letters of rogatory. It must also specify the place for their filing, whether secured creditors need to file their secured claims, and it must contain any other information needed in such notification to creditors according to Mexican law and the orders of the court.[1]

          II.- Submitting proof of claim. The publication of the summary of the bankruptcy adjudication triggers the first chance to submit a proof of claim before the insolvency officer. If the creditor fails to do so, he can submit a proof of claim through the objection to the provisional list of claims and the appeal against the first instance rule on the allowance of claims. While national creditors must submit their proof of claim within the next twenty calendar days following the date of the publication of the adjudication ruling, foreign creditors have forty-five days for filing claims.

          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.

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[1] Article 291.- Whenever under this Law notification is to be given to creditors in Mexico, such notification shall also be given to the foreign creditors whose domiciles are known and that do not have addresses in the national territory. The court must order that appropriate legal steps be taken with a view to notifying any creditor whose domicile is not yet known.

Such notification shall be made to the foreign creditors individually, unless the court considers that, under the circumstances, some other form of notification would be more appropriate. No letters rogatory or other, similar formality is required.