Your debtor sets up another company to avoid paying you: the veil

The case, in five lines

What is brought

A money claim against the debtor company and, by piercing the corporate veil, against the new company and, if the evidence reaches them, against those who control both, seeking a joint and several judgment. It rests on evasion of the law and abuse of rights (articles 6.4 and 7.2 of the Civil Code) and may be joined with the individual liability claim against the director (article 241 of the Companies Act).

Before which court

The civil section of the Tribunal de Instancia (the first-instance court) for the domicile of any of the defendants, at the creditor's choice. If the claim against the director is joined, the mercantile section. Beforehand, an appropriate dispute resolution method (MASC, article 5 of Organic Law 1/2025) must be attempted with every future defendant.

Deadline

Limitation, not a strict time bar. The veil has no period of its own and follows that of the debt: for a contractual debt, five years from when payment could be demanded (article 1964.2 of the Civil Code), which can be interrupted by an out of court demand. Against the director, four years from when the claim could have been brought (article 241 bis of the Companies Act). If there is already a final judgment against the old company, enforcement against it lapses five years after finality (article 518 of the Civil Procedure Act).

Who can bring it

Claimant: the unpaid creditor, whether or not he already holds a judgment against the debtor. Defendants: the debtor company, the new company and, only where the evidence reaches them, the shareholders or directors who organised the move, including the de facto director who gives the instructions behind a figurehead (article 236.3 of the Companies Act).

Financial risk

It is an exceptional doctrine that courts apply restrictively: without evidence that the business was transferred, the claim is dismissed. Costs follow the event, and the cap of one third of the amount in dispute for lawyers' fees applies per litigant who obtains a costs order (article 394.3 of the Civil Procedure Act): suing people you cannot reach multiplies what you pay if you lose.

The new company owes you nothing until a judge says it is the same one

The starting rule works against you. Each company is a separate person, with its own assets, and answers only for its own debts: two companies sharing shareholders, a director or an address does not make one liable for the other. Piercing the veil is the exception, a creation of the Tribunal Supremo (the Supreme Court) that allows a court to look behind the corporate form when it is used to defraud third parties. It rests on the evasion of the law in article 6.4 of the Civil Code and on the prohibition of abuse of rights in its article 7.2.

The Supreme Court has held that the doctrine is applied in a measured and restrictive way, and that its classic cases are confusion of identities and assets, undercapitalisation, external control, and fraud or abuse. In debt recovery one of them appears almost every time: concealed business succession. The company that contracted with you keeps the debts, and a new one, controlled by the same people, keeps the business. Article 1911 of the Civil Code, which makes a debtor answer with all his present and future assets, is circumvented without any document saying so.

There is a nuance that decides many cases before they begin: the veil protects a creditor against a fraud he could not see, not against a risk he accepted. The Supreme Court has refused it where the creditor knew, when contracting, that the company was a mere instrument of its owner and that their assets were mixed. In your case it helps that the new company was born after your debt: you contracted with a business that was genuinely trading, and the emptying came later.

What wins the case is the business moving across for nothing, not matching names

The commonest mistake is to build the claim on coincidences: the same shareholders, the same address, the same corporate purpose. Courts read them as indications, not as proof of fraud, because setting up a second company is perfectly lawful. What the judge needs to see is a transfer: that the customers, the staff, the equipment, the brand, the website or the contracts passed from the debtor company to the new one without the new one paying anything for them, and that the first was left with no assets to meet its creditors.

That evidence is built from chronology and accounts. The BORME fixes the incorporation date, the founding shareholders, the capital and the director of the new company, and the Registro Mercantil (Commercial Registry) allows the filed accounts of both to be compared. When the new company invoices in its first year what the old one stopped invoicing that same year, without having had time to win a single customer, the transfer can be seen in two columns. If the old one also stops filing accounts at exactly that point, the picture is complete.

The rest is proved from the outside: the website's legal notice with the new tax number, the domain and phone number that never changed, the trade name or trademark transferred at the Oficina Española de Patentes y Marcas (the Spanish patent and trademark office), the liveried vans, and shared customers who testify that they went on receiving the same service from the same people under a different invoice. Once the case is under way, the court can be asked to obtain from the Tesorería General de la Seguridad Social (the Social Security treasury) the registrations and deregistrations of workers: a workforce moving from one employer to another within days is very hard to explain.

The veil is not pierced at enforcement stage: the new company must be sued

Many creditors first win against the old company and, when the seizure comes back empty, ask for enforcement to be turned straight against the new one. It almost never works. Article 538 of the Civil Procedure Act limits enforcement to whoever appears as debtor in the enforceable title, to whoever is personally liable for the debt by law or by a guarantee in a public document, and to the owner of assets specifically charged with its payment. The new company fits none of those, and holding it liable in a case in which it could not defend itself clashes with its right to effective judicial protection.

The ordinary route is therefore a full declaratory action against the new company, in which the abuse is argued and proved. If you have not yet sued anyone, the decision is simple: both companies are sued from the outset, in the same case, so that a single judgment holds them jointly and severally liable. The monitorio (the fast payment order procedure) is not the right channel: it rests on documents from your dealings with the debtor, the new company signed none of them, and fraud is not argued there.

There is one exception worth checking first: formal succession. Article 540 of the same Act allows enforcement to be ordered or continued against whoever is shown, with authentic documents, to be the successor of the judgment debtor. If the new company was born of a demerger, a global transfer of assets and liabilities, or a contribution of a line of business entered at the Commercial Registry, that deed may open enforcement against it, and the rules on structural modifications add a liability of their own for companies benefiting from a demerger in respect of debts left unpaid. If the transfer happened in fact, with no deed, there is no shortcut.

The deadline is that of your debt, but do not assume the clock stopped for the new company

Piercing the veil is not a claim with its own time limit: it is the way of extending to another person the claim you already have. For a contractual debt, article 1964.2 of the Civil Code sets five years from when performance could be demanded, usually the due date of each invoice. It is a limitation period, not a strict time bar: it is interrupted by the claim, by a formal out of court demand or by any acknowledgement of the debt, and each interruption starts it again.

What almost nobody notices is against whom it is interrupted. Article 1974 of the Civil Code extends interruption to all debtors in joint and several obligations, but the plenary First Chamber of the Supreme Court agreed to confine that effect to joint liability arising from statute or agreement, and to exclude it for so called improper joint liability, the kind a judgment declares. The new company's liability through the veil is exactly the kind a judge declares. Recorded demands sent only to the old company may have interrupted nothing against the new one or its shareholders.

The practical consequence is immediate: the day the new company appears, it and those who control it are sent a formal demand setting out the debt, and the five years for each invoice are counted as if nothing had been interrupted against them. If that period has already run, a serious but disputed argument remains: against a company that did not exist when the debt fell due, the claim could not be brought until the transfer, and article 1969 of the Civil Code counts limitation from the day the claim could be brought. It is a defence for a tight case, not a plan.

Before suing: a MASC with everyone and, if time presses, a precautionary seizure

The case is civil and is filed with the civil section of the Tribunal de Instancia for the domicile of any of the defendants, at the creditor's choice. If the claim against the director under article 241 of the Companies Act is joined, the matter goes to the mercantile section. In both cases, article 5 of Organic Law 1/2025 requires, for the claim to be admitted, a prior attempt at an appropriate dispute resolution method: a negotiation between lawyers, a confidential binding offer, a mediation or a conciliation.

The detail that sinks claims is to whom that attempt is addressed. The law requires the subject of the negotiation to match that of the case, and a demand sent only to the old company for the invoice does not negotiate the liability of the new one or of its shareholders. That is why the proposal goes to every future defendant and explains why each is being pursued. Done properly, it meets the admissibility requirement, interrupts limitation against the new company and forces each of them to state a position before the case.

If the new company in turn starts shedding assets, or a third one appears, the law does not make you wait. Interim measures sought before the claim and preliminary disclosure requests are exempt from the MASC attempt, and a precautionary seizure of the new company's assets can be requested by showing a good arguable case and the risk that judgment will come too late, with whatever security the court sets. An interim measure obtained before the claim requires the claim to be filed within a very short period, so it is sought with the claim already drafted.

Veil, pauliana, director or insolvency: which claim goes first

Judges prefer a statute to a doctrine, which is why the veil should rarely stand alone. If the business left the old company through specific contracts, such as a sale of machinery, an assignment of contracts or a transfer of the trademark, those contracts can be attacked with the rescission claim for fraud on creditors explained in our guide on the pauliana claim. The veil fits where there is no contract to rescind: where the customers, the staff and the website change company in fact, from one Friday to the following Monday, without a single deed.

The second piece is the director. Article 241 of the Companies Act preserves the claim of a third party directly harmed by the directors' acts, and the Supreme Court has held that a mere de facto closure is not enough, but that stripping the company of assets so that a particular creditor cannot be paid is, which is exactly what someone does who moves the business to another company. It is time barred four years after it could have been brought (article 241 bis) and reaches the de facto director, the one who gives the instructions even though someone else signs (article 236.3). The route under article 367, for failing to wind up, is developed in our guide on the empty company.

That leaves insolvency. If the old company is insolvent and other creditors are in the same position, petitioning for its concurso (insolvency proceedings) puts in the hands of the insolvency administrator the challenge to harmful acts of the previous two years, and the classification stage can reach those who helped empty the company. The trade off is that whatever is recovered is shared among all creditors, whereas the veil, if it succeeds, collects for you. And if what you are owed is wages, the route is different: transfer of undertaking under article 44 of the Workers' Statute, before the social section of the Tribunal de Instancia.

How we run the case, step by step

1. 1

   Fix both timelines: the debt and the move

   Orders, deliveries, invoices, due dates and demands are set in order, and next to them go the incorporation of the new company, the old one's last filing of accounts and the changes in website, staff and customers. Laying one over the other shows whether there is a case and how much time remains against each defendant.

2. 2

   Preserve the outside evidence before it disappears

   Websites, profiles and legal notices change in an afternoon. Their content is recorded in authenticated form, certificates are obtained from the Commercial Registry and the Spanish patent and trademark office and, where the case calls for it, the firm instructs a private investigator to report on activity at the premises.

3. 3

   Check whether there was a formal succession

   If the new company was born of a demerger, a global transfer or a registered contribution of a line of business, enforcement against it under article 540 of the Civil Procedure Act is considered. If the transfer happened in fact, the full declaratory action is prepared.

4. 4

   Serve demands on everyone and open the MASC

   The old company, the new one and those who control them are sent a formal proposal explaining the claim against each. It interrupts limitation against the newly liable parties and meets the admissibility requirement of article 5 of Organic Law 1/2025.

5. 5

   Sue both companies and seek interim measures

   The choice is made between the civil section and, if the claim against the director is joined, the mercantile section. A joint and several judgment is sought, a precautionary seizure if there is risk and, when evidence is proposed, the official requests and disclosure orders that only the court can obtain.

6. 6

   Enforce against the company that holds the business

   With a joint and several judgment, enforcement is directed at the new company's assets, which is where the customers, the receivables and the equipment now are. The right to enforce lapses five years after finality, so the enforcement claim is prepared before the judgment becomes final.

The law that applies

• Art. 6 CC. Its paragraph 4 provides that acts carried out under cover of the wording of a rule which pursue a result prohibited by, or contrary to, the legal order are deemed done in evasion of the law and do not prevent the proper application of the rule that was sought to be evaded. It is the first statutory foundation for piercing the veil. BOE-A-1889-4763
• Art. 7 CC. It requires rights to be exercised in accordance with good faith and provides that the law does not protect abuse of rights or their antisocial exercise: any act or omission that manifestly exceeds the normal limits of the exercise of a right, causing harm to a third party, gives rise to compensation and to measures preventing the abuse from continuing. BOE-A-1889-4763
• Art. 1911 CC. A debtor answers for the performance of his obligations with all his assets, present and future. It is the guarantee that moving the business into another company seeks to empty, and the one that piercing the veil restores. BOE-A-1889-4763
• Art. 1964 CC. Its paragraph 2 provides that personal claims with no special period are time barred five years from when performance of the obligation can be demanded. It is the period for claiming a contractual debt, which the veil extends to the new company without creating one of its own. BOE-A-1889-4763
• Art. 540 LEC. It allows enforcement to be ordered or continued against whoever is shown to be the successor of the party named as judgment debtor in the title, by producing the authentic documents recording the succession. If they are not authentic or the court finds them insufficient, it rules on the succession after hearing the judgment debtor and the alleged successor, solely for the purposes of enforcement. BOE-A-2000-323
• Art. 236 LSC. It makes directors liable to the company, the shareholders and the company's creditors for harm caused by acts or omissions contrary to the law, the articles or the duties of office, with intent or fault, which is presumed where the act is contrary to the law or the articles. Its paragraph 3 extends liability to the de facto director, including the person on whose instructions the directors act. BOE-A-2010-10544
• Art. 241 bis LSC. A liability claim against directors, whether brought on behalf of the company or individually, is time barred four years from the day it could have been brought. It therefore governs the individual claim under article 241, which preserves compensation for third parties directly harmed by the directors' acts. BOE-A-2010-10544
• Art. 5 LO 1/2025. In civil matters, as a general rule, a claim is admitted only if an appropriate dispute resolution method has first been attempted, and the subject of the negotiation must match that of the case. Its paragraph 2 excludes specific situations, among them applications for interim measures before the claim and for preliminary disclosure. BOE-A-2025-76

Each article checked against the consolidated text published in the BOE (the Spanish official gazette).

Frequently asked questions