Liquidating a company in Mexico is not an easy task to accomplish. Sometimes, it takes several months to dissolve and liquidate an entity.
The General Corporations Law (“GCL”) seeks to strike a balance between, on the one hand the interests of those wanting to close business operations for good, and on the other hand, their creditors’ rights. It means that besides the paperwork needed to prepare and execute the liquidation formalities and the liquidator’s activities, certain agreements and notices should be made public to let the creditors know on the company’s dissolution/liquidation to give them the opportunity to oppose.
On the other hand, there are rules established in the GCL that allow corporations to follow a fast track way to wind down their businesses, provided certain requirements are met. The points summarizing such a quick proceeding are listed as follows:
1. The company interested in conducting such a fast track proceeding must meet the following conditions:
(i) it is formed by individuals.
(ii) it does not have an unlawful corporate purpose.
(iii) it has published in the electronic system established by the Economy Department, the notice of registration listing the current company’s equity structure, at least 15 days prior to the meeting approving the dissolution.
(iv) it is not doing business anymore and has not issued electronic invoices during the past two years.
(v) it is up to date in the compliance of its tax, labor, and social security obligations.
(vi) it has no debts.
(vii) its legal representatives are not subject to criminal proceedings due to the possible perpetration of a tax or patrimonial crime.
(viii) it is not subject to an insolvency proceeding (concurso mercantil).
(ix) it is not a financial institution.
2. The proceeding will follow the steps below:
(i) The resolution approving the liquidation must be adopted by all the partners, stating under oath, that the above-mentioned conditions are met. The liquidator will be appointed by the meeting.
(ii) The resolution must be published in the electronic system established by the Economy Department no later than within the 5 working days following the dissolution/liquidation meeting minutes.
(iii) After the resolution has been published, the Economy Department will review the minutes of the dissolution and liquidation meeting to confirm the document meets the conditions mentioned in (i) and (ii), and if that is so, the minutes for registration with the Public Commercial Registry will be sent by such a public agency.
(iv) The partners/shareholders will deliver all the goods, books and documents of the company to the liquidator no later than within 15 working days following the dissolution/liquidation meeting minutes.
(v) The liquidator will distribute the remaining corporate assets to the partners/shareholders in proportion to their contributions no later than within 45 working days following the dissolution/liquidation meeting minutes.
(vi) The shareholders will deliver their stock share certificates to the liquidator no later than 15 days following the meeting mintes approving the liquidation.
(vii) Once the company has been liquidated, the liquidator must publish the entity’s final balance sheet in the electronic system established by the Economy Department no later than within 60 working days following the dissolution/liquidation meeting minutes.
(viii) Finally, the Economy Department will record the cancellation of the company’s commercial number with the Public Commercial Registry and notify the Tax Administration Service (Mexican IRS) on the company’s liquidation.
Should the partners lie or act fraudulently, they will be jointly and severally liable without limitation to third parties, and regardless of the criminal liability to which they might be subject.
Liquidators will have the option to keep the records of the company whether on printed format or by electronic means, optical means or by any other store technology, provided that the applicable official standard is followed, during a term of 5 years after the liquidation is finalized.
Under the regular liquidation proceeding, liquidators must keep the records for a 10-year term after the liquidation process is concluded.
Concluding remarks
The fast tract proceeding to liquidate an entity in Mexico seems to be useful for those companies that meet the above conditions. Once the liquidation resolutions have been formally adopted, it takes around 60 working days to have the proceeding concluded.
However, the conditions are very strict, and the process is audited by the Economy Department in almost all its stages leading the companies to lose control on the outcome. Furthermore, the GCL does not state what happens whether the Economy Department fails to meet the deadlines established to wind down the business.
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