jurisdiction

1. Are members of the armed forces permitted to hold shareholdings in private companies, including startups, provided that they do not participate in management?

Mexican law does not establish a general prohibition preventing active members of the armed forces from holding shares in private companies, including startups, solely by reason of their military status.

The Organic Law of the Mexican Army and Air Force (Ley Orgánica del Ejército y Fuerza Aérea Mexicanos), the Organic Law of the Mexican Navy (Ley Orgánica de la Armada de México) and the General Regulations on Naval Duties (Reglamento General de Deberes Navales) regulate the organisation, duties and functioning of the armed forces but contain no provision expressly prohibiting military personnel from owning shares or other equity interests in private companies.

Accordingly, holding a minority equity interest in a private company, without participating in its management, administration or operations, is not prohibited for active members of the Mexican armed forces, provided that such ownership does not give rise to a conflict of interest in relation to their military duties.

2. Is notification or approval required before acquiring a shareholding or establishing a company?

The Mexican system is based primarily on mandatory disclosure rather than prior approval.

Mexican law does not require active members of the armed forces to obtain prior authorisation before acquiring shares in a private company or incorporating a business.

However, as public servants, members of the armed forces are subject to the General Law on Administrative Responsibilities (Ley General de Responsabilidades Administrativas – "LGRA"), which requires them to file asset and conflict-of-interest declarations (declaración patrimonial y de intereses). This follows from Article 108 of the Mexican Constitution, under which individuals holding positions within the Federal Public Administration are considered public servants for the purposes of the administrative liability regime.

Through these declarations, public servants must disclose interests that may give rise to actual or potential conflicts of interest, enabling the competent authorities to identify situations that could affect the impartial exercise of public functions.

From a practical perspective, where a company operates in the defence sector or has actual or potential dealings with the Secretariat of National Defence (Secretaría de la Defensa Nacional – "SEDENA"), the Secretariat of the Navy (Secretaría de Marina – "SEMAR") or other defence-related authorities, it would be prudent for the service member to disclose the investment in their interests declaration and, where appropriate, seek guidance regarding any potential conflict of interest.

3. Are there any notable limitations, thresholds or conflict-of-interest rules?

The principal limitations arise from the conflict-of-interest regime established under the LGRA.

Under Articles 3(VI) and 47 of the LGRA, a conflict of interest exists where a public servant's personal, family or business interests may affect the impartial and objective performance of their official duties.

The LGRA does not establish any statutory threshold, such as a minimum or maximum percentage shareholding, beyond which members of the armed forces are prohibited from holding an interest in a private company. Instead, the analysis is functional and focuses on whether the particular interest gives rise to a conflict with the individual's official duties.

This approach is reflected in Article 7(X) of the LGRA, which requires public servants to refrain from associating with investors, contractors or businesspersons to establish private businesses where doing so could affect the impartial and objective performance of their official duties.

In addition, public servants, including members of the armed forces, must refrain from participating in decisions, procedures or official actions where they have a personal, family or business interest that could compromise their impartiality. Where such a conflict arises, they are required to abstain from participating in the relevant matter and report the situation through the appropriate internal channels.

Accordingly, the legal risk increases where the company has, or seeks to have, contractual or regulatory relationships with SEDENA, SEMAR, the National Guard (Guardia Nacional) or other public authorities within the defence or national security sector. In such circumstances, the relevant consideration is not the mere ownership of shares but whether the investment creates a conflict with the service member's official duties.

Conclusion

Mexican law does not impose a blanket prohibition on members of the armed forces holding shares in private companies. Instead, the applicable framework is based on mandatory asset and interests disclosure obligations and conflict-of-interest rules applicable to public servants.

Accordingly, holding an equity interest in a startup, without participating in its management or administration and provided that no conflict of interest arises in connection with the service member's official duties, is generally permissible under the applicable Mexican legal framework.