Out-of-court liquidation or voluntary liquidation does not require the filing of a complaint or evidence to demonstrate that the debtor is in payment cessation. This decision must be agreed to by all shareholders and validated at a company assembly. During this meeting, one or more liquidators will be appointed.
Once all these internal decisions have been made, the liquidator will have to submit the minutes of the assembly of the company’s dissolution and liquidation in the Public Registry of Commerce. After that, the company will go through the following series of steps:
- Close ongoing transactions and operations;
- Make payments on debts to creditors and suppliers;
- Sell the company’s assets;
- Distribute the liquidated and remaining assets to those creditors and shareholders who are owed money;
- Draw up the liquidation balance sheet.
The liquidators must keep the documents of the partnership and the books of account and cooperation on deposit for ten years after the date of liquidation.
Simplified out-of-court liquidation
There is a simplified proceeding to voluntary liquidation in Mexico. Under the simplify procedure, the company must carry-out the following steps:
- Carry out a shareholders’ assembly to define the resolutions of the liquidation and appoint the liquidators.
- Publish the minutes of the assembly in the publication of commercial entities website (Publicaciones de Sociedades Mercantiles or PSM); there is no need to formalise them before a notary public.
- With the authorisation of the Mexican Ministry of Economy, deliver the liquidation minutes in the Public Registry of Commerce.
- All the company’s assets, property, records, and documents are transferred to the liquidator.
- Distribution by the liquidator of the remaining assets to the shareholders, according to their shares.
- Delivery of share certificates to the liquidator by all shareholders.
- The liquidator publishes the final balance sheet of the company in the PSM.
- The Mexican Ministry of Economy will submit the cancelation of the registration of the company in the Public Registry of Commerce and notify Mexican tax authorities.
Legal proceedings can be initiated voluntarily by the debtor filing an insolvency proceeding requesting the liquidation of all its assets, properties, goods and rights or by one or more creditor on a compulsory liquidation when the company can no longer repay its debts. Admission of the petition requires the filing of evidence showing in a presumptive manner that the debtor is in payment cessation at the time of filing. The Federal Institute of Specialists in Commercial Bankruptcy Proceedings (IFECOM) will be the main authority in these procedures.
Insolvency proceedings consist of two steps: conciliation and bankruptcy. Conciliation has a statutory conciliation time frame of 185 days once the judge's ruling (i.e. at the beginning of the insolvency procedure) is published in the Mexican Federal Official Gazette. It is during this conciliation period that the company may prove its solvency and express its desire to continue operating. As mentioned before, this period may be extended up to 180 additional days.
During the conciliation phase, the debtor must either try to reach an agreement with its creditors or carry out a reorganisation plan. If a reorganisation agreement is reached, then the judge issues a resolution. If it approves the agreement, the proceedings are terminated.
At the end of the conciliation procedure and in the event that a restructuring agreement has not been reached, the company may be declared to be in bankruptcy. The purpose of bankruptcy is the sale of the company, its assets, goods, and rights for payment to its recognised creditor.