Comments on a Mexican Due Diligence Process
Legal and business due diligence activities are part of the day-to-day tasks of any corporate legal practice, and especially in areas such as public financing transactions and mergers and acquisitions. In a simplistic manner, we could define a due diligence process as the series of actions and analysis performed with the purpose of learning and understanding the real situation prevailing in a business as of a relevant point in time and keeping in mind a specific purpose or goal.
There are different types of due diligence procedures, such as the financial, real estate, intellectual property, import and export, corporate, and of course the “overall” or general due diligence, commonly used for mergers and acquisition transactions.
For the purposes of this article, we have assumed knowledge of the generalities of a common due diligence process and its elements. Our goal is to generally address some of the basic areas which should be reviewed within an overall due diligence process in Mexico, such as:
Financial and Tax Matters. As of 2012, the Mexican Stock Exchange established as a regulatory requirement that all issuers listed on the securities market present their financial information in accordance with the International Financial Reporting Standards (known as “IFRS”), issued by the International Accounting Standards Board (IASB). Some medium-sized and large companies choose to keep their accounting records under these accounting principles in order to standardize the presentation of their financial statements and ensure comparability, transparency, and reliability for domestic or international investors. On the other hand, the vast majority of private companies in Mexico keep their records in accordance with the Mexican Financial Reporting Standards (known as “NIF”), which are issued by the Mexican Financial Reporting Standards Board (CINIF). The NIF constitute the applicable regulatory framework in Mexico, designed to govern the preparation and presentation of financial statements of Mexican companies within the national context. IFRS and NIF are distinct accounting frameworks that share fundamental principles but differ in their origin, scope, and application. The substantial differences among the various accounting standards make it essential to conduct a detailed review of a business’ financial information by a team duly familiar with those differences. A full analysis of the business’ tax situation is mandatory before any merger or acquisition transaction is formalized.
Real Estate Ownership. Mexican law limits the real estate ownership rights over certain regions of its territory, known as the “restricted zone” to Mexican national only. Additionally, ownership of real estate by foreigners or Mexican legal entities with foreigners’ “admission” clause requires compliance with periodic reports to the Mexican Secretary of Foreign Relations. Ensuring proper compliance with these regulations is important before taking control, or participating in the capital, of a business entity.
Labor Matters. Labor matters are especially relevant in our country. In Mexico, unlike in other countries where labor matters do not play a decisive role in a transaction despite forming part of a due diligence process, labor issues are a significant component of any negotiation and, in some cases, become the driving force behind a sale or acquisition process. While some experts indicate that the Mexican labor unions’ force is becoming less radical every day, there still are some labor unions and workers’ groups which are conflictive and result extremely costly in the day-to-day operation of a business, generating substantial costs and risks. The strategic management of labor matters in Mexico, including labor union’s relations, goes beyond the word of the law and legal technique and, in my opinion, is truly the result of a combination of technique, awareness, intelligence, experience and some “artwork”. In addition to critical labor union matters, labor risks upon the acquisition of a Mexican business may result to be financially material and often give rise to purchase price adjustments in a transaction. It is important to briefly mention that one of the particularities of the Mexican employment relationship is the right that every worker has to receive compensation for unjustified work termination and which, among other factors, is determined based on the seniority of each worker, measured as the number of years during which each relevant worker has been employed by the particular employer. As Mexican labor law provides for very limited causes for justified labor termination, and those available are normally difficult to prove in court, these severance and termination compensation amounts may add-up to material amounts even in small business. Therefore, the risks involved should never be minimized.
Other Corporate and Compliance Matters. In addition to complying with the areas mentioned above, Mexican companies must fulfill certain annual obligations during the first months of the calendar year. Some of these obligations include: (i) registration or renewal of their registration with the Mexican Business Information System, (ii) the filing, where applicable, of a report of foreign partners or shareholders with the Tax Administration Service (“SAT”), (iii) holding an annual partners’ or shareholders’ meeting to approve the company’s financial statements for the previous fiscal year, and (iv) registration and filing of notices with the National Registry of Foreign Investment, if applicable. Likewise, the company must keep its corporate books up to date and maintain records related to certain activities concerning the prevention and fight of corruption, including those linked to vulnerable activities, as well as the identification and updating of controlling beneficiaries, in accordance with applicable regulations.
Especially in due diligence procedures, and in subsequent merger or acquisition transactions, relying on the professional advice of expert legal counsel is a determining factor for the success of a business venture.
February 2026.
This article was originally written in 2001 by Jaime Treviño and updated in February 2026 by Emilia Cardona. Please send any questions or comments to info@jata.mx. The original author is the Managing Partner of JATA – J.A. Treviño Abogados and the Resident Partner of the firm’s Houston office, and may be contacted at jtrevino@jata.mx. The co-author who updated and supplemented this article is a Senior Associate at JATA and may be contacted at ecardona@jata.mx. JATA is a Mexican law firm with offices in Monterrey, N.L., Mexico, and Houston, Texas.
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