The High Court of Justice of the Canary Islands has closed the door to any corporate shortcuts to access public funds. a final ruling, reported by Canarias7The Administrative Court has upheld the decision of the Gran Canaria Island Council to deny subsidies to Mohican Canarias, finding that the company was operating as a conduit for companies in bankruptcy proceedings to circumvent the prohibitions of the General Subsidies Law. The ruling fully confirms the decision of the Island Sports Institute and reinforces a principle that transcends this specific case: the legal form cannot negate the purpose of the law.
The ruling reviews on appeal the decision of the Administrative Court No. 2 of Las Palmas de Gran Canaria, which had already upheld the decree of the president of the Island Sports Institute lifting the suspension of the 2018 earmarked subsidy file and denying payment. The core of the reasoning is clear: business succession can be presumed when there is consistent evidence of material, organizational, and functional continuity with companies declared bankrupt.
The High Court of Justice of the Canary Islands (TSJC) emphasizes that its conclusion does not stem from an isolated assessment of the administrative file, but rather from facts already established in the social jurisdiction, which are binding under the principle of res judicata. Specifically, the Court relies on a ruling by the Social Court No. 7 of Las Palmas de Gran Canaria (February 2020), which incorporated Mohican Canarias into the business group of Open Gran Canaria Nosolotenis and Open Island Events. In response, the appeal merely reiterated arguments already rejected without challenging the binding force of those rulings.
The facts established by the court paint a classic picture of a shell company: the same registered office and administrator, no registered employees, use of the pre-existing companies' resources and facilities, and organization of the same sporting event that had already received subsidies. According to the court, this continuity allowed the company to continue receiving public funding despite the legal prohibition against entities in bankruptcy proceedings and those resulting from the transformation, merger, or succession of other companies in that situation.
The argument of legitimate expectation also fails. The High Court of Justice of Catalonia (TSJC) points out that the subsidy is not a donation, but rather an allocation conditional upon strict compliance with legal requirements. The existence of favorable resolution proposals or prior administrative communications does not negate a legal ground for prohibition, especially since—as the ruling notes—the company itself was aware of the doubts surrounding its legal status since 2018.
The Court also clarifies the discussion regarding subcontracting: the determining factor in the veto lies not in how the event was carried out, but in the presumption of continuity with the company in bankruptcy proceedings, regardless of the outcome of the insolvency proceedings. In support of its argument, the court cites previous legal doctrine that describes a “single and self-serving organization” created to circumvent the “serious legal impediment” and channel subsidies that, otherwise, would have had to be used to pay creditors and employees.
The institutional message is clear and has systemic reach: the same facts cannot "exist" for one jurisdiction and "not exist" for another. Avoiding this inconsistency—the High Court of Justice of the Canary Islands (TSJC) warns—is a requirement of legal certainty. With this ruling, the Court dismisses the appeal, upholds the validity of the denial of the subsidies, and orders Mohican Canarias to pay court costs, up to a limit of 900 euros. Beyond the tennis and padel tournaments that gave rise to the litigation, the ruling sets a precedent that is essential reading for administrations and operators: when corporate structure is used to circumvent the law, the subsidy becomes a risk, not a right.
