On April 30, the Parliamentary Group of the Partido Revolucionario Institucional (PRI) submitted in the Senate a "Bill by which the Fifteenth Title "Emergency Insolvency Regime” is added to the Commercial Insolvency Law (Ley de Concursos Mercantiles)" related to the declaration of the sanitary emergency due to force majeure generated by the COVID-19 (the “Initiative”).
The Initiative attributes its authorship to the Barra Mexicana, Colegio de Abogados, A.C. with the intention of accelerating up the insolvency proceeding (concurso mercantil) as a result of the extraordinary emergency affecting the commercial, business, and jurisdictional environments. With good reasons, the Initiative recognizes that there are industries and sectors of the economy that have practically come to hold for several weeks, resulting in significant financial damages.
The insolvency proceeding (concurso mercantil) has had as its main objective, and as a matter of public interest, to preserve the ongoing of the companies, and to prevent that a general breach in regards to payment obligations, may jeopardize the continuity of commercial entities and of other companies with which they maintain a business relationship.
The Initiative aims to offer any company, whether PYME (small and mid-size enterprise) or not, to place an insolvency proceeding on a fast-track, as a tool to keep companies in operation (and with it, the chains of production), through an expedited procedure which may significantly limit the time and formalities of the process.
Emergency Insolvency Regime
The Emergency Insolvency Regime, according to the Initiative, would apply to the extent “unforeseen material adverse effects or force majeure event, or a declaration of emergency, sanitary contingency, or natural disaster, at a regional or national level, aggravates the economic situation of the country or a region and affecting individuals or legal entities”. The application of the Emergency Insolvency Regime presented by the Initiative will be available for as long as said emergency subsists, and up to the following six months.
The main features proposed in the Initiative are:
- A voluntary request by a company, in the format to be designed by the Federal Institute of Commercial Insolvency Specialists (Instituto Federal de Especialistas de Concursos Mercantiles, “IFECOM”) with a declaration under penalty of perjury, disclosing that finds itself in the cases of generalized non-compliance with payment obligations established in the Law, will be sufficient to allow the formal initiation of the insolvency process, without having to prove a general breach of its obligations.