MEXICO Law and Practice Contributed by: Carlo Cannizzo, Marco Cannizzo, Stefano Amato, Enrique García and Paloma Iglesias, Cannizzo
4. Tax Due Diligence • Review of the target’s tax compliance history, including VAT, corporate income tax, payroll taxes, and federal, state, municipal and international tax obligations. • Analysis of any tax audits, disputes or litigation with the SAT. • Identification of tax benefits, exemptions or risks associated with past transactions. 5. Labour and Employment Due Diligence • Review of employment agreements, management agreements, golden parachutes, collective bar - gaining agreements and independent contractor arrangements to assess compliance with the LFT. • Identification of severance liabilities, unpaid ben - efits and potential labour disputes. • Examination of employee benefit plans, pen - sion obligations, and compliance with the labour laws, with internal policies and with social security (IMSS) and housing fund (INFONAVIT) contribu - tions. • Assessment of outsourcing or subcontracting structures in compliance with recent labour law reforms. 6. Contracts and Commercial Due Diligence • Review of key customer and supplier contracts, distribution agreements, and franchise or licensing arrangements, usually with an amount and duration materiality threshold. • Identification of change-of-control provisions, termination clauses and restrictive covenants that could be triggered by the business combination. • Assessment of any outstanding obligations, war - ranties or indemnities that could pose risks post- transaction. 7. Litigation and Dispute Due Diligence • Review of past, pending or threatened litigation, arbitration or administrative proceedings. • Analysis of intellectual property disputes, share - holder disputes or labour claims that could affect the transaction. • Verification of governmental investigations or regu - latory actions against the company.
compliance with the LGSM and other applicable regulations. • Verification of the legal standing of the company, including corporate records, board and shareholder meeting minutes, and any special rights granted to shareholders. • Analysis of past and pending corporate transac - tions, including mergers, spin-offs, joint ventures, and capital increases or decreases. • Review of any foreign investment restrictions or compliance with the LIE, if applicable. 2. Regulatory and Compliance Due Diligence • Assessment of compliance with industry-specific regulations and requirements issued by Mexican regulatory authorities, such as the CNBV, the CNA, the SAT, PROFECO (consumer protection author - ity), COFEPRIS (health authority), CNE and SENER (energy authorities) and labour regulators. • Evaluation of permits, licences, authorisations, concessions and governmental approvals required for operations. • Verification of compliance with anti-money laun - dering and anti-corruption laws, including adher - ence to the Federal Law on the Prevention and Identification of Transactions with Illicit Proceeds ( Ley Federal para la Prevención e Identificación de Operaciones con Recursos de Procedencia Ilícita ). • Review of environmental compliance, especially for industries subject to oversight by the Ministry of Environment and Natural Resources ( Secretaría del Medio Ambiente y Recursos Naturales ). 3. Financial Due Diligence • Examination of the company’s audited and unaudited financial statements, tax returns and accounting policies to assess financial stability and accuracy. • Identification of contingent liabilities, undisclosed debts or off-balance-sheet obligations and compli - ance with GAAP standards. • Analysis of working capital, cash flow and financial projections to determine profitability and financial health. • Review of existing loans, credit facilities and finan - cial covenants that could impact the transaction.
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