A shelf company is an organization that’s already registered but has never conducted business and holds no liabilities or assets. As the name suggests, a shelf company is registered to sit on a ‘shelf’ waiting for someone to purchase it. Today, you also have options of buying a shelf corporation with a bank account in Canada. Buying an old shelf company for sale is one of the best ways to acquire an organization without going through a very time-consuming process. However, registering for an organization is quicker and more cost-effective rather than purchasing an old shelf company for sale. This is why shelf companies are becoming a thing of the past.
The History of Shelf Companies
Initially, it took a lot of time to register a company. Most people couldn’t wait for the company registration and wanted it sooner. Thus, solicitors, specialist organization formation services and accountants kept a stock of companies who waited for the ‘shelf’ that was ready for the purchase.
Purchasing a Shelf Company
Whenever a client purchases a shelf organization, providers of the shelf company might need to make changes in the organization that includes –
- Transferring the shares to the nominal purchaser
- Changing the current directors to new ones that are appointed by the purchaser
- Changing the registered address of the organization as a new address according to the purchaser
- Changing the name of the company as per the purchaser
Shelf companies are registered under the standard constitution. After their purchase, the purchaser needs to make the required changes to the constitution. For many, a major advantage of acquiring a shelf organization is saving time. Purchasing a shelf organization allowed many to
- Acquire business immediately
- Gain quick access to third party equity and corporate debt financing
- Be readily available to enter or bid into contracts quickly
Incorporating a New Company
In the present era, it’s quicker and simpler to incorporate a new organization. It’s also much more efficient and less burdensome to set up an organization with specific features rather than rapidly changing characteristics. For instance, if you set a new organization, you can select –
- Company name
- Shareholders
- Registered office
- Principal place of business address details
- Number and type of shares issued to each shareholder
- Corporate secretary and director of the company
However, many new organizations have a standard constitution, there’s nothing that can prevent you from creating a tailored constitution. There are extra charges for the ones who want to change their standard constitution. Moreover, it’s less expensive to set up the new organization because you just have to pay the setup costs. If you purchase a shelf company, you will have to pay for both the organization and costs to transfer that company to you. This is why shelf company business has slowed down. However, it’s always possible to acquire shelf organizations from the shelf company providers that already exist in the market. In many cases, businesses still go for the shelf company providers even when they don’t sell shelf companies. It’s important to make a wise decision.
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