What is a Legal Audit and what are it’s benefits?

Holland House
HHM
May 30, 2024

Introduction
In most Spanish-speaking countries, within the corporate business sphere, there still isn’t a widespread awareness regarding the necessity and convenience of engaging in legal planning that includes the execution of a legal audit for an organization or company. Unfortunately, despite a legal audit representing a powerful tool for the prevention of legal issues, companies and their representatives are accustomed to taking reactive rather than preventive actions after legal problems arise within the company, in an attempt to protect their assets, corporate assets, and personal and corporate reputation.

However, from our perspective as corporate legal advisors, we recommend and strive to discourage the use of solely reactive actions. We advise every entrepreneur and businessperson to take preventive actions against conflict, primarily through conducting a legal audit at least once a year. This is to verify the company’s compliance with all applicable legal regulations, aiming to prevent and mitigate legal risks.

What is a legal audit?
A legal audit is a method for conducting a review of all processes, actions, omissions, and documents related to a company’s operation. Its purpose is to serve as a tool for preventing legal conflicts by timely detecting regulatory breaches and legal risks. Upon detection, the legal audit allows for the implementation of corrective actions to prevent the potential occurrence of legal risks and subsequent legal conflicts.

What is the objective of a legal audit?
The legal audit aims to prevent the occurrence of legal risks and conflicts within the company, thereby safeguarding corporate assets, the assets of partners or shareholders, the company’s reputation, and its business opportunities.

What are the advantages of a legal audit?
Through a legal audit, companies and their partners or shareholders obtain the following advantages in the short, medium, and long term:

  • Protection of corporate assets.
  • Protection of personal assets.
  • Protection of personal and corporate reputation.
  • Legal certainty.
  • Comprehensive knowledge of the company.
  • Certainty in the company’s operations and acts.
  • Establishment of an organizational culture of ethics and regulatory compliance.
  • Construction of long-term business resilience.

What risks does the company and its partners or shareholders face if they do not conduct a legal audit?

Failure to conduct a legal audit will prevent the company from detecting regulatory breaches and legal risks, which may lead to the following situations:

  • Emergence of litigation (lawsuits).
  • Seizure of assets.
  • Imposition of fines.
  • Disqualification from contracting with the government.
  • Disqualification from engaging in commercial activities.
  • Confiscation of assets.
  • Dissolution of the company.
  • Imprisonment of the company’s partners or shareholders.

Procedure for conducting a legal audit

The legal audit begins with a questionnaire that the company must complete. Subsequently, legal specialists request the necessary information and documentation, conduct interviews with the responsible parties in each area of the company, and immerse themselves in the company’s reality to issue a report detailing the company’s legal status, identifying regulatory breaches and legal risks, and proposing corrective measures to address the breaches and mitigate or eliminate the legal risks.

Conclusion

At UPLAW Abogados | Attorneys-at-Law, we specialize in the prevention and resolution of legal disputes and are firmly committed to assisting and providing guidance and support to as many companies as possible, becoming their best and most loyal allies in the defense, pursuit, and achievement of their interests and objectives.

Therefore, we have decided to conduct an essential legal audit for any micro, small, or medium-sized enterprise that requests it, at no cost. To do so, simply contact us and request it through any of the following contact methods: manuelmm@uplaw.com.mx, contacto@uplaw.com.mx, and 56-55-45-03-59 (WhatsApp).

By Director Manuel Mansilla Moya
UPLAW Abogados | Attorneys-at-Law
www.uplaw.com.mx