01 Oct New judicial guidance on the effects of collateral trust in case of the debtor’s insolvency.
On August 3rd, 2018, the Eight Federal Collegiate Circuit Court issued a new judicial criteria reinforcing the nature of Mexican guaranty trusts and their use in project financing.
It is important to point out that this criteria may serve as a reference for other tribunals in their resolutions, but are not obliged to abide by this precedent when resolving similar matters since it is an isolated precedent.
The principal aspects that the precedent establishes are the following:
- The main effect of incorporating a trust is to create an independent estate from that of the parties that are involved in the trust.
- When property is included in the trust’s estate, said assets will be regarded a part of the trust’s property.
- Even when the trust’s assets remain in the debtor’s possession, they cannot be used to settle other debts.
- In accordance to the Insolvency Law, bankruptcy stage in insolvency proceedings is a liquidation trial of the merchant’s estate in which only assets of his property may be included.
- As a result of the above mentioned, the affectation of an asset into a trust subtracts it from the estate of the insolvency proceeding.
In conclusion, this isolated criterion indicates that because of the fact that the assets that have been affected in trust have become part of its patrimonial mass, they cannot be used to pay debtors in the bankruptcy proceeding.
For further questions or comments, do not hesitate to contact us.
Contact
Azucena Marín
amarin@cuestacampos.com
Andrés Urquidi
aurquidi@cuestacampos.com