(Expansion) – In press release number 617/20 of December 2, 2020, the National Institute of Statistics and Geography (INEGI) reported that of the 4.9 million micro, small and medium establishments registered in the 2019 Economic Censuses, 3.9 million survived the crisis caused by COVID-19, that is, just over a million micro, small and medium-sized enterprises (SMEs) closed their doors permanently in 2020.
Faced with this catastrophic circumstance, it is inevitable to wonder why large companies such as Grupo Famsa or Interjet go to bankruptcy to resolve their insolvency situation, while SMEs do not consider it as a feasible option to reorganize their liabilities?
Although there are different answers to this question, such as the stigma that exists against bankruptcies in Mexico, without a doubt the complexity, cost and difficult access to the procedure prevent SMEs from resorting to it when they are in crisis.
In the first place, we find a series of requirements that companies must comply with when presenting their application for commercial bankruptcy before the Federal Judges. These requirements are not entirely easy to develop taking into consideration the urgency of the company to enjoy the judicial protections granted by the Commercial Bankruptcy Law.
Likewise, some of these requirements can be onerous for SMEs, such as the obligation to guarantee the approximate amount of 130,000.00 (one hundred and thirty thousand pesos 00/100 MN) to pay the fees of the visitor, who is in charge of reviewing the accounting and company documents to verify your insolvency situation.
Secondly, we find that the time in which a commercial bankruptcy is processed is often detrimental to companies, because despite the law seeks to make the procedure agile and fast, in practice we find that only the time in which it is It takes time to admit the procedure, as well as to issue the sentence declaring the company in bankruptcy has caused its financial problems to worsen.
As long as the procedure is not admitted, the company does not have the protections provided by the Commercial Bankruptcy Law, such as the suspension of enforcement procedures against its assets.
Likewise, as long as the declaration of commercial bankruptcy is not issued, the company’s debts continue to generate interest, so the liability continues to increase, making it almost impossible for companies with the particularities that characterize SMEs to plan a feasible restructuring.
Third, companies have faced the problem that, despite reaching a restructuring agreement with their creditors, the tax authorities are opposed to granting the bankrupt the forgiveness of their tax credits.
This prevents companies from recovering their viability, especially if they are SMEs, since their income will hardly be sufficient to pay tax credits without the possibility of their being forgiven, at least partially.
This problem is not new, nor is it exclusive to our country. Around the world, insolvency regimes have been inefficient in achieving the reorganization of SMEs, as well as their orderly liquidation.
However, SMEs make up the majority of companies in economies around the world, the laws that regulate insolvency proceedings were designed to solve the financial crises of large companies.
Faced with this situation, we find that some countries have recently modified their legislation to include special procedures to deal with the insolvency of SMEs. For example, at the end of 2019, the United States added a Subchapter to Chapter 11 of its Bankruptcy Code, called “ The Small Business Reorganization Act ”.
In addition, the United Nations Commission for International Trade Law is currently working on the “Draft Text on a Simplified Insolvency Regime”, focused on creating a legislative guide for countries to incorporate fast insolvency procedures into their legislation, simple, flexible and low-cost aimed precisely at SMEs.
In Mexico, given the economic problems that companies have faced due to the COVID-19 crisis, in April 2018, Senator Claudia Edith Anaya Mota, with the support of the Mexican Bar, Colegio de Abogados, AC and the Ibero-American Institute Bankruptcy Law, presented the reform initiative to the Commercial Bankruptcy Law to add a new title, on the “Emergency Bankruptcy Regime”.
It precisely seeks to solve some of the aforementioned problems that make it difficult for SMEs to enter bankruptcy and make it an inefficient mechanism for said companies to resolve their insolvency situation.
However, to date the initiative has not been approved, so there is no certainty about when SMEs will enjoy a suitable judicial procedure to face their economic and financial problems in our country, which is especially important given the current economic crisis .
Editor’s note: Zulima González is a partner in the Pérez Correa, González law firm. His practice focuses on civil and commercial litigation, including cases involving bankruptcies and bankruptcies, as well as contractual and extra-contractual disputes, non-material damage and property damage litigation. She has a degree in law from the Anahuac University. Write to her at [email protected] and / or follow her on. The opinions published in this column belong exclusively to the author.
