WHAT TO DO IN THE FACE OF THE ECONOMIC CRISIS? STRATEGIC TAX DECISIONS
Author: Manuel Nevárez Chavez
In this crisis it is clear and forceful that the few government support with fiscal resources are not and will not be enough to preserve companies and employment.
Businesses and individuals depend on the decisions we make and our own resources so that the activities we carry out remain productive and meet our health and wellness needs.
Today more than ever, it is essential to know our particular financial situation to make decisions that allow us to continue generating the resources that allow us to preserve our company and / or our income.
If we consider that each business is different, it is the entrepreneur who has to decide how, when and where to continue with its operations in accordance with the corresponding legal provisions, or to stop operating.
If the decision is made to continue with the business, a business plan must be in place that is objective and has a real chance of being fulfilled.
In the event that the decision is to stop operating, alternatives will have to be evaluated to comply in the best possible way with the debts and obligations that are pending at that date.
Here are some recommendations that can help the company to continue with its activities or to stop operating at the lowest possible cost.
- Systematize processes and invest in technology
- Review risk coverage and internal controls
- Legal analysis regarding the rights and obligations that must be fulfilled according to the current contracts and the laws that are applicable to them.
- Financial analysis to know exactly the assets and rights of the company at their realizable value, in order to use them as collateral in loans or to dispose of them to obtain financial resources.
- Review the business plan to modify it, if necessary, preparing financial projections in the short, medium and long term.
- Request and obtain a decrease in provisional income tax payments
- Get the tax refund in favor
- Determine and record labor liabilities
- Human Talent Management
- Convert fixed assets into cash by selling and then leasing (pure rent or finance lease)
- Arrange and / or process loans or lines of credit
- Request deferral of payments to financial institutions and / or restructures of current loans
- Take advantage of the alternatives of deferred payment of contributions such as Social Security, Infonavit, Payroll Tax.
- Negotiate and agree on discounts, bonuses and / or deferral of payments with suppliers and creditors.
- Analyze the conversion of debt into equity
- Postpone distribution of cash dividends to shareholders and / or capitalize profits to be distributed
- Additional capital contributions by partners
- Payments in kind or dation in payment to creditors and / or suppliers
- Extra-judicial agreements with creditors, suppliers and / or workers
- Agreements with creditors according to the Mediation Law of the State of Chihuahua
- Request conciliation and / or agreements with creditors according to the Commercial Bankruptcy Law
- Request conclusive agreements from PRODECON for improper actions of the tax authorities
- Go to PROFECO for breach of suppliers in the supply of goods or services
- Go to the CONDUSEF for non-compliance and / or problems with financial institutions
- Get legal and financial advice
Regarding the previous recommendations, I would like to point out some additional comments:
It is very important that the partners are informed of the financial situation of the company, presenting accurate and timely information that allows them to make decisions regarding the options to continue with the business or enter a liquidation or bankruptcy process.
In the case of continuing with the company, a new business plan is necessary that is achievable and that can achieve the objectives set with the appropriate direction.
In the event that it is not possible to continue with the operation of the company, a company liquidation plan must be presented, naming, where appropriate, the people responsible for maximizing the company’s assets for due compliance with legal obligations and payment of debts.
In the latter case, it may be useful to request a specialist in commercial bankruptcies from IFECOM (Federal Institute of Commercial Bankruptcies), to help in the process of reaching agreements with creditors that support the continuation of the company’s activities or to liquidate the company, avoiding legal processes that can be onerous and not prompt or expeditious.
Article 312 of the Bankruptcy Law offers the aforementioned option and if it is not possible to agree with the creditors to comply with the company’s obligations, it is possible to choose to submit the request for commercial bankruptcy by the merchant, complying with some requirements , in accordance with articles 20 and 20 bis of the aforementioned law.
The commercial bankruptcy procedure begins with a visit to the company to find out if the assumptions established in articles 9, 10 and 11 of the aforementioned law are met and, where appropriate, the company is declared in commercial bankruptcy, the process continues with a stage of conciliation and recognition of credits with their due graduation and priority of payment to creditors, seeking to preserve the company and sources of employment, negotiating the extension of payment terms, debt forgiveness, deductions, no interest generation , option to capitalize debts, payments in kind, etc.
If the commercial bankruptcy is declared by the Judge, collection and enforcement processes on the company’s assets are stopped, with the advantage that this implies.
If the conservation of the company is not possible even with the agreements obtained or because these are breached, the company is declared bankrupt and a trustee is appointed as administrator and legal representative of the company by IFECOM, replacing the merchant and their legal representatives, to proceed with the disposal of the assets and pay the creditors recognized in the conciliation stage, up to the extent of the financial resources obtained from the disposal of the assets.
The appointed Trustee is jointly and severally liable for compliance with the company’s tax obligations, in accordance with the provisions of article 26 section III of the CFF (Federal Tax Code).
In the event of debt forgiveness due to commercial bankruptcy, income tax is not paid for the corresponding amounts, in accordance with the provisions of article 15 of the respective Law.
In accordance with article 146-B of the Federal Tax Code, the tax authorities may partially forgive the tax credits of companies that are in commercial bankruptcy, if an agreement has been signed with their creditors.
It is relevant that companies have accurate and timely financial information for decision-making and are advised by specialists who support the conservation and growth of the company as a going concern, so that they continue to generate wealth, employment and the payment of contributions, which it is what allows the government to fulfill its constitutional obligations.
It is essential to agree with investors, partners, creditors, workers, authorities and all those who have an interest in the continuity of the business, the fulfillment of the rights and obligations that correspond to each one, with social responsibility.
The commercial bankruptcy and / or lawsuits may be the last option to try to keep the company, it is recommended to first analyze other options, seeking empathy, communication and negotiation with all those who have an interest in the business.
The analysis of each company by legal and financial specialists is recommended, working together, looking for the best alternatives and strategies to keep companies and employment as a priority and if this is not possible, support those interested in the business to recover their resources at the lowest possible cost.
Consider and remember that:
- In this life you do not get what you deserve, but what you can negotiate
- Nothing is more useless than paying what could be avoided
- The future depends on what we do in the present
- In the midst of every difficulty is the opportunity