Prepackage bankruptcy in Mexico

 A debtor may file a petition to be adjudicated in bankruptcy in three ways: the ordinary petition, the prepackage petition, and the imminent general default petition.

Bankruptcy adjudication is not automatic, and even in voluntary petitions, a prebankruptcy procedure needs to be initiated before the bankruptcy adjudication. In the prebankruptcy, the parties will submit evidence to prove whether the debtor is in general default. It is not sufficient that the debtor merely confesses a general default to the court. However, there is no need for a prebankruptcy procedure in case of a prepackage petition, and the judge will immediately adjudicate the debtor in bankruptcy.

The prepackage petition must be signed by the debtor and the creditors representing at least the simple majority of the total liabilities stating, under oath, that the debtor is in general default.

Besides avoiding the prebankruptcy procedure, there is no other utility of the prepackage petition because:

-        The reorganization plan, signed and submitted by the debtor and his creditors, will not necessarily be the final plan submitted for approval because the creditors that signed it might not be allowed as creditors or because they do not meet the majority while other creditors that did not sign the initial plan do.

-        There is no legal provision to compel the creditors who signed the prepackage petition to sign the plan's final draft (Lock-up agreements).

For further information about bankruptcy law in Mexico, my work "Bankruptcy Law in Mexico", 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.

Comentarios

Publicar un comentario

Entradas populares de este blog

The not-so-automatic stay, the Minera del Norte case.

Bankruptcy adjudication is not automatic, and even in voluntary petitions, a prebankruptcy procedure needs to be initiated before the bankruptcy adjudication. In the prebankruptcy, the parties will submit evidence to prove whether the debtor is in general default. It is not sufficient that the debtor merely confesses a general default to the court. There have been cases in Mexico where the debtor must walk through a long path to get the petition's admission, even in voluntary petitions. This is the case of Minera del Norte, S.A. de C.V., a Mexican mining company, which filed a petition in bankruptcy on May 11, 2020, dismissed three days later on the grounds that the financial statements were not signed. The debtor filed a motion for reconsideration before the bankruptcy court, and the dismissal was affirmed on May 28, 2020. The debtor, then, on June 22, 2020, filed an amparo lawsuit (an extraordinary judicial recourse) before a Federal High Court, which on February 12, 2021, ...
Leer más

What to expect from Aeromexico’s Chapter 11

What to expect from Aeromexico’s Chapter 11   Grupo Aeromexico, S.A.B. de C.V . (Aeroméxico), is a publicly held company incorporated under the Mexican laws. It has its establishment in Mexico and yet filed for bankruptcy in a US court. Probably Aeromexico wanted to get access to a more flexible and expedited bankruptcy, but at the end of the day, its bankruptcy story will be finished in Mexico. Under the Mexican Bankruptcy Law (LCM, for Ley de Concursos Mercantiles ), the bankruptcy proceeding that Aeromexico started in the US is a foreign proceeding (art. 279, LCM). If Aeromexico wants to replicate in Mexico its reorganization plan approved or the stays granted in the US, it will be necessary to open a bankruptcy proceeding in Mexico under the LCM, provided that it has an establishment in Mexico (art. 293, 306, LCM). The bankruptcy proceeding in Mexico will start at the reorganization stage, the process for allowing claims will commence again, and Aeromexico must submit a p...
Leer más

Claim’s priority under the Mexican Bankruptcy Law.

For clarity on this topic, we will explain the priority regime in different scenarios. In the first scenario, there are no secured or specially privileged creditors. In this scenario, claims against the estate are seniors to the rest of the creditors. Within the claims against the estate, labor claims against the estate have priority, followed by the post-petition financial transactions, [1] the claims derived from security, repair, conservation, and administration of goods, and finally, those derived from judicial expenses. After the claims against the estate, there are the singularly privileged creditors, within which debtor’s burial costs are ranked first, and then illness expenses. The singularly privileged creditors are followed by the tax creditors and other labor creditors. After the tax creditors and other labor creditors, the general unsecured creditors and the subordinated creditors are positioned. The second scenario has secured creditors. The rules applicable to the fi...
Leer más