What is shelf companies ?

 

A shelf company is a company that is already registered but has never traded or conducted business and holds no assets or liabilities. Essentially, the company is registered to sit on a 'shelf', waiting for a someone to buy it.

A shelf company, also known as a shelf corporation, ready-made company, blank check company, or aged company (in all these cases you can use ‘company’ or ‘corporation’), is a legally-registered company that has no activity.

A shelf company can be purchased by people who want to set up a business quickly without having to go through all the paperwork.

These types of companies, that can be literally ‘bought off the shelf’, are typically formed and sold by law or accounting firms.

Not to be confused with shell companies, which are typically fictitious entities created for the sole purpose of committing fraud and/or money laundering.

The individual or group of people that established a shelf company went to the trouble of creating the business, setting it all up from a legal standpoint, but chose not to do anything with it.

Why do people purchase shelf companies?

People may purchase a shelf company to:

      • Save time and avoid red tape.

    • To be able to bid on contracts. In some jurisdictions, businesses can only

 bid on contracts if they have been in business for a specified length of time.

    • You may be on the verge of signing a contract or a deal and need

a company number rapidly.

      • People in the European Union may purchase a ready-made company

 if they need a VAT number quickly because they are about to import some goods.

      • To attract investors or consumers by showing they have been around for a while.

    • To gain access to loans.

Business experts say many of the reasons given today are no longer credible. Several years ago, it would take months to set up a business, Today, however, in North America, some jurisdictions in Western Europe, and Australia, this can be done in a couple of hours.

Buying a shelf company is not likely to make it easier to get loans, since creditors (and investors) will check the company’s history.

A shelf company may be created in anticipation of an imminent project that is not yet ready for launch. Instead of waiting until later, the business people go through the legal processes in establishing the company in advance so that they can hit the ground running when everything starts.

According to Cambridge Dictionaries Online, a shelf company is:

“A company that has been officially created so that it can be sold to someone who does not want to have to create a company themselves.”

Purchase of a shelf company

 

The acquisition of a shelf company follows a five-step approach, which will provide you with the necessary reliability.

1 Reservation

2 Corporate documents 

3 Purchase price

4 Documents by courier

5 Notary appointment

 

Make a reservation for your shelf company free of charge and without obligation

You choose a company at your preferred location and can make a reservation either online or via our reservation hotline. If you prefer to make a reservation by telephone, you can reach our expert team at

Corporate documents for your company

We will then immediately send you the following documents:

√ questionnaire for company acquisition

√ registration notice of the commercial court register

√ certificate of incorporation

√ current bank statement for the shelf company´s bank account

√ draft of a bilingual purchase and transfer agreement (German/English)

Purchase price payment

You can either transfer the purchase price for the shelf company to FORIS directly or for a minimal surcharge deposit the purchase price with your lawyer or tax consultant, who will then forward the payment on to FORIS.

 

You will receive your company documents by overnight courier

Following the payment of the purchase price, we will send your company files (original corporate documents, power of attorney, bank confirmation of the fully paid-up share capital) by overnight courier.

 

Common Legitimate Uses

Shelf Company

• Shelf companies were used to avoid having to register a new company as it was a lengthy process. However, registering a company won’t take you more than 10 minutes these days.

• Shelf companies are advantageous when applying for a loan or bidding for a contract. This is because a shelf company exists many years before you buy it and so appears to have been in the market for longer, creating legitimacy.

It also helps businesses start selling their products or services immediately because they do not appear as a new entity to prospective customers.

Legal loopholes of shelf companies for creating black money

 

Even though shelf companies legal in some parts of the world, they are mainly used to convert black money to white money.

These companies have no physical existence, no assets and no liabilities but still have investments. Shelf companies helps to park funds of big companies and investors.

This also paves way for illegally receiving loans through shelf companies and using it for other purpose which lead to creation of black money.

Many financial experts say shelf companies are key routes for terrorist funding and transaction.

In India shelf companies are legal which makes the INVESTMENT EXCHANGE SYSTEM (IES) vulnerable.

 

Shelf companies are most often used as an intermediatory for transferring funds within subsidiaries of a company for tax reduction and to show loss.

Example: a public company’s managing director buying out his own companies shares using this type of Repeated Action formula

For Buying:(1 Shelf company to buy 5% of shares in his company and buy another Shelf company) x 10= 50% of shares illegally parked with same owner in different pockets to reduce tax.

 

The Above example shows how companies are maintaining their control stability with the help of a dormant companies.

 

To control the parking of money and shares which removes the speculations of share market exchange system (SMES), Indian government should make shelf companies illegal and regulate the inter and intra firm transaction with subsidiaries of a companies.