Regularise an Existing Company or Incorporate a New One? Key Legal Considerations for Making the Right Decision

When a company has not filed its accounts for some time, has outstanding tax obligations or has practically ceased trading, it is normal to ask an uncomfortable question: is it worth regularising it, or is it better to start with a new company? In this post, which complements our article on the comprehensive regularisation of companies with outstanding obligations, we analyse both alternatives from a legal and practical perspective, taking into account not only efficiency criteria, but also the risks of liability for directors and possible debt succession if a new company is created.

Regularising an existing company: restoring operations with legal continuity

Regularising a company involves restoring its accounting, tax and corporate position in order to recover its full operating capacity. In practice, this process usually includes:

• Updating or reconstructing the accounting records for pending financial years.
• Filing outstanding Corporate Income Tax returns.
• Preparing, approving and filing annual accounts.
• Legalising accounting books.
• Lifting the registry closure.
• And, where applicable, reinstating the Tax Identification Number before the Spanish Tax Agency.

From a legal standpoint, the company retains its legal personality at all times, even if it has been inactive or has failed to comply with formal obligations. However, this continuity also entails something important: the company carries its legal, tax and corporate history with it, which may be either an advantage or a risk depending on the case.

 

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Advantages of regularisation

• The company’s seniority is maintained.
• Existing licences, contracts or relationships are preserved.
• No new entity is created, avoiding operational duplication.
• Non-compliance is corrected in an orderly manner.

The critical point: directors’ liability

When there are prolonged breaches, especially if the company is in a legal cause for dissolution due to losses under Article 363 of the Spanish Companies Act, a key issue arises: the risk of personal liability for directors under Article 367 of the Spanish Companies Act. This occurs when directors fail to act diligently in the face of an equity imbalance or prolonged inactivity, which may lead to liability for corporate debts. Therefore, regularising a company is not just about “bringing the company up to date”, but also about properly organising its legal situation in order to reduce future personal risks.

 

Creating a new company: the apparent quick solution and its hidden risks

In many cases, the alternative considered is creating a new company (“NewCo”) and leaving the previous one inactive or without activity. At first glance, this option may seem simpler: no history, no previous accounting and no accumulated obligations. However, from a legal standpoint, this solution may create significant risks if it is not structured correctly.

The risk of business succession or de facto succession

The authorities may consider that there is hidden business continuity if the new company continues the activity of the previous one using:

• The same material resources.
• The same workforce.
• The same premises or clients.
• Or even the same operational structure.

This may give rise to what is known as de facto succession, with significant consequences:

• Derivation of tax debts under Article 43 of the Spanish General Tax Law.
• Claims for outstanding liabilities of the previous company.
• Potential extension of liability to directors.

In other words: creating a new company does not automatically eliminate the risks associated with the previous one if, in practice, it is considered to be a continuation of the same business.

The doctrine of piercing the corporate veil

In addition, courts may apply the doctrine of piercing the corporate veil when they detect an instrumental use of legal personality. This occurs when the new company is used to evade debts or liabilities of the previous one, which may allow creditors or the authorities to bring claims directly against the new structure or its shareholders.

 

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Which option is better? There is no single answer

The decision between regularising a company or creating a new one depends on several factors.

Aspect to assess	Regularising the existing company	Creating a new company
Legal continuity	The same entity is maintained, with its legal personality, seniority and history.	A new corporate structure is created, initially independent, but not always isolated from previous risks.
Company history	The previous track record is preserved: contracts, licences, business relationships and operational history.	The company starts without its own history, which may make the initial setup easier, but also requires building credibility from scratch.
Main risks	It may carry accounting, tax, corporate or registry breaches that must be corrected in an orderly way.	It may generate risks of business succession, derivation of liability or piercing of the corporate veil if there is real continuity of the business.
Cost and time	It depends on the volume of outstanding obligations and the actual status of the company.	It may seem faster at the beginning, but the transition must be properly structured to avoid transferring problems to the new company.
When it may be advisable	When the company retains assets, licences, contracts, reputational value or a structure worth recovering.	When the previous company is unviable, retains no relevant value or its accumulated liabilities make continuity inefficient.
Key decision factor	It is not enough to bring the company up to date: it is necessary to assess whether regularisation reduces risks and allows safe operation.	It is not enough to start from scratch: it is necessary to prevent the new company from being interpreted as a hidden continuation.

Regularisation is usually the best option when:

• The company has relevant assets.
• There are licences, contracts or valuable operational history.
• The breaches can be corrected.
• Business continuity is sought.

Creating a new company may make sense when:

• The accumulated liabilities are unmanageable.
• The previous structure is operationally unviable.
• There are no assets or relevant reputational value.

But even in these cases, the solution is not simply to “start from scratch”, but to properly structure the transition to avoid risks of succession or liability.

The real key: prior analysis before deciding

Beyond the option chosen, what is truly decisive is to carry out a complete prior diagnosis of the company’s accounting, tax and corporate situation. In practice, many incorrect decisions arise from failing to properly assess:

• The actual status of outstanding obligations.
• The existence of tax or corporate risks.
• The situation at the Commercial Registry.
• Possible hidden contingencies.

This analysis makes it possible to determine which route is more efficient and secure in each case.

How Adlanter can help you

If you have an inactive, blocked company or a company with outstanding obligations, at Adlanter we help you decide the safest route: regularise, reactivate or incorporate a new company. We analyse the accounting, tax, corporate and registry situation to identify risks, set priorities and define a viable solution. No dangerous shortcuts. No blind decisions. Tell us about your case and we will review with you which option best protects your business and avoids future liabilities.

Frequently asked questions about regularising a company or creating a new one

Can I create a new company if the previous one has debts?

Yes, it is possible to incorporate a new company even if a previous company has debts. But this does not always eliminate the risks. If the new company continues the same activity, with the same resources, clients, team or structure, it may be interpreted as business continuity and trigger liabilities.

Does regularising a company prevent directors’ liability?

Not always. Regularisation helps organise the situation and reduce risks, but directors’ liability will depend on how the company has been managed, the type of breaches involved and whether there was a legal cause for dissolution or other relevant contingencies.

What happens if a company has not filed accounts for years?

Failure to file annual accounts may lead to registry closure, penalties and difficulties operating normally. In addition, if there are outstanding tax or accounting obligations, it is advisable to review the full situation before deciding whether to regularise the company or create a new structure.

When is it advisable to regularise an old company?

It is usually advisable when the company retains value: contracts, licences, assets, seniority, business history or a structure worth recovering. It may also be the safest route if the breaches can be corrected and legal continuity is desired.

When may it be better to create a new company?

It may make sense when the previous company no longer has operational value, carries significant liabilities or its recovery would be inefficient. Even so, the transition must be carefully designed to avoid risks of business succession or derivation of liability.

What should be reviewed before deciding?

Before making a decision, it is advisable to analyse pending accounting records, tax obligations, registry status, possible debts, corporate risks, active contracts, employees, assets and any element that may imply business continuity.