The Mexican Insolvency Act provides that a company seeking an insolvency judgment declaration must support its request with documents evidencing its lack of capacity to meet its financial obligations. Section 20 of the Mexican Insolvency Act specifies that the following documents must support the request audited financial statements for the last three years;
- report explaining the reasons that led the company to its insolvency status;
- list of the company’s creditors and debtors;
- list of all assets of the company; and
- list of current litigation in which the company is involved.
If the company seeking the protection of an insolvency proceeding fails to produce these documents, a court may not grant it insolvency status.
On 10 April 2015, the Third Collegiate Circuit Court in Mexico City issued a non-binding precedent describing the requirements that audited financial statements the company produces must meet in order to be considered valid
- the person issuing the financial statements of the company must have an accounting degree regardless if he or she is an independent accountant or auditor or belongs to an auditing firm; and
- this accountant must sign the financial statements.
Additionally, the court considered that for this statement to be valid, the accountant must have the following credentials
- be registered before the Mexican tax authorities;
- have a professional degree recognized by the Ministry of Public Education; and
- be certified by an authorized public accountant association empowered to do so.
Despite being a non-binding precedent, other courts may adopt the same criteria identified in this decision. Failing to meet these requirements could potentially jeopardize a commercial entity’s ability to secure a declaration of insolvency.