Legal Due Diligence in Mexico

Nearshoring has moved a great deal of North American capital and supply chain into Mexico in a short period. The diligence playbooks came along unchanged, and they do not fit. What follows is what actually needs checking, and where the structural differences bite.

1. Corporate existence and authority to contract

Start with the acta constitutiva — the notarized incorporation deed — and the folio mercantil electrónico assigned on inscription in the Public Registry of Commerce. Confirm the folio against the registry rather than accepting the document at face value.

Then confirm authority. In Mexico, powers of attorney are granted by notarized instrument and can be limited by subject matter and by amount. A general manager may hold powers for acts of administration but not for acts of ownership. A signature from someone without the relevant power is a defect that surfaces later, usually when the counterparty wants out.

2. Litigation and insolvency exposure

Litigation is the area where a US-style search most reliably produces a false clean. Mexico's cases live in four unconnected systems: state courts, federal jurisdictional bodies, federal labor authorities and state labor authorities.

For a target, the questions are: what is pending, what is the aggregate amount in dispute, is the target usually plaintiff or defendant, and is there any concurso mercantil — insolvency — filed or threatened. See how to check lawsuits in Mexico for the search mechanics.

3. Labor liabilities

This is where foreign acquirers are most often surprised, because the exposure does not stay with the seller.

• Pending labor claims across both federal and state labor authorities
• Seniority and severance accruals — Mexican severance is statutory and can be substantial for a long-tenured workforce
• Employer substitution. Where a business is transferred as a going concern, labor obligations transfer with it and the outgoing and incoming employers share responsibility for a statutory period
• REPSE registration for any specialized services subcontracting. Mexico's 2021 outsourcing reform prohibits general personnel subcontracting; unregistered arrangements create both labor and tax exposure, including loss of deductibility
• Social security and INFONAVIT contributions — arrears are a preferential credit

4. Tax compliance and SAT 69-B

Beyond confirming the RFC is active and returns are current, check the target — and its principal suppliers — against the SAT 69-B lists.

Article 69-B of the Federal Tax Code lets the SAT publish taxpayers presumed to have issued invoices for operations that never occurred, known as EFOS. Presumption first, then a definitive list published in the Diario Oficial de la Federación if the taxpayer fails to rebut.

5. Ownership and related parties

Establish who actually owns the target, what else those people own, and whether related-party transactions are supporting the numbers. Mexican corporate records do not always make shareholding current or transparent, so this generally means working from the incorporation deed forward through subsequent registered acts, and then checking the individuals independently.

The pattern worth ruling out: a predecessor entity with debt and litigation that was abandoned, with the same principals now behind the clean target you are looking at.

A due diligence checklist for a Mexican target

Area	Check	Deal impact if it fails
Corporate	Folio mercantil, acta constitutiva, powers of attorney	Contracts may not bind; closing delayed
Litigation	Nationwide search across all four judicial systems	Undisclosed contingent liabilities
Insolvency	Concurso mercantil filings	Transaction may be voidable
Labor	Claims, severance accruals, REPSE, social security	Liabilities transfer with the business
Tax	RFC status, SAT 69-B for target and suppliers	Deductions disallowed retrospectively
Sanctions	OFAC and government supplier debarment lists	Deal-breaking for regulated acquirers
Ownership	Shareholders, related entities, predecessors	Undisclosed history and conflicts

Where BLOC fits

BLOC does not replace Mexican counsel. It replaces the weeks that counsel would otherwise spend assembling records: litigation from four judicial systems back to 1996, registry data from 147 registry offices, tax compliance status and sanctions screening, returned as a single report in minutes. Counsel then does the part that requires judgment. For a broader overview of the records available, see our legal background verification in Mexico service.

For portfolio or supplier-base screening rather than a single target, the same data is available through an API.