Data Regulatory Due Diligence as a Distinct Category of Legal Auditing

The growing importance of personal data protection in corporate operations supports the view that the market is moving toward recognizing a new category of regulatory legal audit: data regulatory due diligence.

Historically, the evolution of mergers and acquisitions has shown that the expansion of due diligence has always gone hand in hand with the increasing regulatory complexity of the markets.

Initially, analyses focused primarily on corporate, contractual, tax, and labor matters. Later, the strengthening of competition law made antitrust due diligence indispensable, especially in transactions subject to prior regulatory review. Subsequently, the growing importance of social, environmental, climate, and governance risks drove the consolidation of ESG due diligence as a permanent component of asset valuation and the allocation of contractual risks.

Personal data protection appears to be following a similar trajectory.

The entry into force of Law No. 13,709/2018 (LGPD), the intensification of regulatory activity by the National Data Protection Agency (“ANPD”), the rise in litigation involving privacy and information security, and the growing economic dependence on information assets have given rise to a new framework for evaluating business operations. It is not merely a matter of verifying the formal existence of privacy policies or contractual clauses related to data processing, but rather of examining the degree of maturity of the governance framework implemented by the data controller.

In this context, we propose to understand regulatory due diligence as an audit procedure designed to comprehensively assess the level of legal compliance, the effectiveness of governance, regulatory exposure, and the economic impact resulting from the personal data processing activities carried out by the company that is the subject of the transaction. Its purpose goes beyond the mere identification of administrative or judicial liabilities. The aim is to assess whether the organization demonstrates the structural capacity to comply with the governance obligations set forth in the LGPD, particularly those arising from Articles 6(X), 38, 46, and 50.

From this perspective, regulatory due diligence now covers, among other aspects:

  • inventory and classification of the company’s information assets;
  • identification of the processing operations and their respective legal bases;
  • assessment of the quality of treatment operation records;
  • analysis of the governance programs provided for in Article 50 of the LGPD;
  • verification of the effectiveness of the technical and administrative measures required by Article 46;
  • the existence, scope, and updating of Personal Data Protection Impact Assessments (Art. 38);
  • history of security incidents and response mechanisms;
  • management of operators, suppliers, and international data transfers;
  • the maturity of internal controls, periodic audits, and accountability mechanisms;
  • potential economic impact resulting from administrative sanctions, class-action lawsuits, individual lawsuits, and reputational damage.

It is clear, therefore, that this type of audit is not limited to assessing regulatory compliance (compliance review). Its purpose is to evaluate the company’s institutional capacity to manage risks related to the entire personal data processing cycle.

This paradigm shift brings data protection closer to other traditional areas of corporate governance. Just as integrity programs have come to be evaluated not only by the formal existence of codes of conduct, but by the effectiveness of their prevention, detection, and response mechanisms, data governance tends to be examined according to criteria of institutional maturity, continuous risk management, and the ability to objectively demonstrate compliance.

This perspective is directly in line with the most recent understanding of experts in the field, who view the protection of personal data as a permanent tool for safeguarding fundamental rights and consider it to require organizational control mechanisms; who identify the LGPD as a risk-management-oriented regulatory model and maintain that the principle of accountability imposes a genuine duty on organizations, requiring effective governance structures capable of demonstrating compliance to authorities, data subjects, and economic agents.

From this perspective, regulatory due diligence is not merely a technical extension of traditional auditing. It is an autonomous category of regulatory assessment, the scope of which is neither exclusively legal nor exclusively technological, but essentially interdisciplinary, bringing together elements of regulatory law, data protection, corporate governance, information security, risk management, and business strategy. Its consolidation is likely to have significant implications for contractual practice.

The maturity of data governance may influence asset pricing, the scope ofrepresentations and warranties, the negotiation ofindemnity provisions, the definition ofconditions precedent, the purchase of specificcyber insurance, and, in certain circumstances, the economic decision itself to proceed with the transaction.

The case brought before the Federal Supreme Court in ADI No. 7,896 represents, in this context, a concrete manifestation of a broader phenomenon. Although the controversy is limited to the privatization of Celepar, the requirement for objective demonstration of data governance reveals a trend toward strengthening accountability as a structural element of legal certainty in corporate transactions.

If this trend becomes firmly established through coordinated action by the ANPD, the Judiciary, and the market, regulatory due diligence will come to occupy a position equivalent to that currently held by competition, environmental, and ESG audits: no longer a mark of best practices, but a standard requirement for managing regulatory risks in corporate transactions. This is the true “fifth generation” of M&A due diligence —beyond the Celepar case—which could serve as a conceptual model for future situations, in a trend comparable to that observed in the European Union.

Our Personal Data Protection team at Araújo e Policastro Advogados is available to answer any questions or provide further clarification.