Company liquidation in Mexico is governed by the Law on Commercial Enterprises, which covers the reasons and procedures applicable in such cases. The rules of the Commercial Insolvency Law must also be observed. The process of closing a company in Mexico relies on several steps completed over a period of several months or even more.
Below, our company formation specialists in Mexico explain the company winding up process. They are also at your disposal with various services related to the liquidation procedure.
Table of Contents
Company liquidation reasons under the Company Law in Mexico
As mentioned above, the Commercial Code provides for the grounds under which one can terminate a business in Mexico. They are:
- conclusion of the activities of the company in Mexico;
- impossibility of carrying out its activities in accordance with its Articles of Association;
- a mutual understanding between the shareholders to close the Mexican company;
- not reaching the minimum number of shareholders;
- loss of two-thirds of the share capital without the possibility of recovery can also lead to company liquidation in Mexico;
- inability to pay its creditors, which leads to insolvency followed by bankruptcy.
The reason dictates the company liquidation procedure applicable to the Mexican company.
| Quick Facts | |
|---|---|
| Applicable law | Commercial Companies Act. |
|
Conditions to liquidate a company |
– termination of activities, – incompatibility with the company’s Articles of Association, – shareholders’ agreement, – indebtedness, – share capital losses. |
|
Types of procedures |
Voluntary and compulsory. |
| Voluntary company liquidation | Voluntary company winding up is possible with the mutual understanding of the shareholders. |
| Compulsory company liquidation |
Compulsory liquidation occurs when the company is no longer able to pay one, more, or all its creditors. |
| Appointment of a liquidator in a voluntary procedure |
The liquidator is appointed by the shareholders during the special meeting in which the winding up decision is adopted. |
| Appointment of a liquidator in a mandatory procedure |
In this case, the liquidator is appointed by the judge. |
| Authorities to notify in case of liquidation |
– the Trade Registrar, – the tax authorities. |
| Requirement to notify other parties (YES/NO) |
Yes, the creditors and the employees must also be notified of the closing of the Mexican company. |
| Notice requirements | After the adoption of the resolution. |
| Additional accounting requirements to comply with (if any) |
Yes, the liquidator must draft an Annual Declaration within 3 months of the liquidation decision. |
| Company liquidation time frame (approx.) |
Approx. one year in the case of voluntary liquidation, more than a year and a half in the case of judicial proceedings. |
| De-registration with the Mexican Revenue Department required (YES/NO) |
Yes. |
| Trade Register deletion requirement (YES/NO) |
Yes, after liquidation, the Mexican company must also be dissolved. |
| Company liquidation support (YES/NO) | Yes, feel free to address our Mexican incorporation experts if you need assistance in closing a company. |
If you consider your business is undergoing any of these situations, you can consult with our experts in company registration in Mexico on the best course action, especially because reorganization measures can be taken in certain cases.
The two procedures for closing a company in Mexico
Company winding up in Mexico is possible through:
- a voluntary procedure;
- a mandatory procedure.
While the first one implies a decision adopted by the shareholders to terminate the activities of the Mexican company, the second one relies on the decision made by a court of law.
The Ministry of Economy introduced a simplified company liquidation procedure for businesses without any type of debt.
What are the conditions for starting voluntary company liquidation in Mexico?
As mentioned above, voluntary liquidation can be started by the will of the company’s representatives. However, this procedure can be initiated provided that certain conditions are met. The basis of starting the voluntary company liquidation in Mexico is to prove that the company can no longer meet its financial obligations and that it is insolvent.
Along with this basic rule, the company must also meet the following conditions, presented in the list below by our team of consultants in company formation in Mexico:
- the company should prove it is not able to meet its financial obligation to at least 2 creditors;
- the financial obligations should be at least 30 days overdue and their value represent at least 35% of the entire debt, or the company has insufficient assets, which can’t satisfy at least 80% of its financial obligations;
- assets in this case can mean deposits and investments that have a term of less than 90 days, calculating from the date when the petition for voluntary company liquidation in Mexico has been made;
- assets can also mean securities which can be sold in a period of maximum 30 days from the moment when the petition is submitted;
- they can also refer to accounts receivables/clients with a maturity date of maximum 90 calendar days (calculated from the petition date).
Liquidation steps
Company liquidation in Mexico must follow specific steps that finish with its dissolution or deletion from the Trade Register. These steps are:
- the extraordinary meeting of the shareholders which in the case of the mandatory procedure must be held after the ruling of the court;
- the appointment of the liquidator who will carry out any remaining business and will handle the payment of the creditors;
- the submission of the decision to liquidate the company with the Trade Register and Mexican tax authorities;
- creation and filing of the last annual declaration;
- holding the final general assembly;
- submission of the request for company dissolution.
If you need assistance in gathering the papers for the company winding up in Mexico, you can rely on our team. Here is also our infographic on this subject:
Liquidators’ role in closing a company in Mexico
The liquidator is one of the most important individuals in the company liquidation procedure in Mexico. Their appointment lies on the shareholders when the company is closed voluntarily and by the court in the case of the mandatory procedure.
In the case of voluntary winding up, the liquidator is usually one of the directors, while in the other situation, he or she is an officer of the court. The liquidator will:
- complete all remaining obligations of the company;
- make an inventory of the company’s assets;
- sell the respective assets to reconciliate the creditors’ claims;
- draft the financial statements of the company;
- lodge the company’s dissolution request with the Trade Register;
- maintain the company’s liquidation documents for 10 years.
You can rely on our company formation agents in Mexico for more information on the duties of liquidators. Here is also our video on this subject:
What court is responsible for company liquidation in Mexico?
The procedure falls under the responsibility of the Bankruptcy Court. When the case is brought up in the court, the judges will resolve the petitions regarding the debtors and the creditors, in accordance with the stipulations of the law.
They can also determine whether a company can be declared insolvent and can approve or reject a reorganization agreement initiated by the parties. Our specialists in company incorporation in Mexico can provide the necessary legal advice on court proceedings and can also provide legal representation in such cases.
We also recommend you to request the advice of our team of accountants in Mexico, as they can analyze the financial situation of your company and can recommend various strategies that can help your business.
If your business can be restructured, our team can offer step-to-step assistance on legal, financial, managerial strategies that would best suit your company. If restructuring is not possible or it is determined that it is not a suitable strategy, you can always set up a company in Mexico once the liquidation process is completed.
Our specialists can help you open a company in Mexico in a new or the same industry, in a different part of the country or can assist you in investing overseas.
Duration of the company liquidation procedure
When it comes to how long it takes to close a company in Mexico, here is what to expect:
- the minimum period is 12 months;
- the maximum period is 20 months for the voluntary procedure;
- in the case of a mandatory procedure, the time frame can exceed 20 months.
Deletion from the Trade Register is the last step in company liquidation in Mexico. Feel free to contact us if you need assistance in company winding up in Mexico.