The irregular company

The irregular company

The regime of an irregular company or the company in formation is temporary and transitory, that is, limited. The actions that fall under the regime of the company in formation are those carried out by a company during the normal process of foundation and before its registration.

After that moment, when it is no longer possible to speak of normality in the foundation process, the Law dismisses the company in formation file and replaces it with a different, more aggravated and severe one: the company that has become irregular.

The key to understanding the logic of this system is none other than thehttps://letslaw.es/en/the-irregular-company/ constitutive nature of the registration of capital companies.

In other words: the lack of registration prevents the existence of a capital company with the legal personality corresponding to the type of company chosen in each case and, thus, the realization of the business purpose pursued by the partners (incorporation of a corporation, limited liability company or limited joint-stock company).

If this business purpose is frustrated by the lack of registration within a reasonable period of time (one year), or by deliberate non-registration, the partners can request the dissolution of the unregistered company and thus obtain, after the liquidation of the common assets, the liquidation quota to which they are entitled, which “will be satisfied, whenever possible, with the restitution of their contributions” (art. 40 LSC).

Implications of an irregular company

However, the problems presented by an irregular company are not limited to the internal corporate sphere (company/partners), but are even more serious in the sphere of external relations (company/third parties). The company that has become irregular will certainly have intervened in the traffic by contracting with third parties (external legal relations).

The treatment of these relations will follow the rules of the partnership or, if applicable, those of the civil company (art. 39.1 LSC), depending on the commercial or civil nature of the unregistered company that has become irregular. In this state, it has not obtained the corresponding legal personality, which entails the application of a limited liability regime, thus being called an irregular company.

It is not a question of the partners being liable for the company’s debts autonomously, as if the irregular company did not exist. On the contrary, the company has a sufficient degree of personification (not the personality proper to capital companies, but a certain degree of personification), which confers it the capacity to intervene in the traffic and to bind itself.

The treatment of the irregularity in the commercial traffic is thus carried out by resorting to the most severe regime that proclaims the personal and joint and several liability of the partners against the corporate creditors (art. 127 CCom).

At the moment in which the irregular company proceeds to its inscription in the Mercantile Registry, automatically the regime of responsibilities finishes, but in the same way, the partners will continue responding of the contracts or acts previous to the inscription.

The way to dissolve an irregular company is for one of the partners to officially request its dissolution before the Mercantile Court corresponding to the place where the company has its registered office. Subsequently, the return of the participations or shares can be claimed once the process of liquidation of the patrimony of the company has been completed.

Regularizing the situation of a company that has become irregular can entail complicated procedures and the imposition of possible sanctions. However, this process represents an opportunity to establish legal certainty and safeguard the interests of those who are part of it.

At Letslaw we have professional commercial lawyers on our team who can advise on the incorporation of companies from the earliest stages to their registration in the commercial register.