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The Professional's Toolkit - Shelf Companies

Contributed by A.C.T. - Offshore Limited
08 January, 2012

Contributed by A.C.T. - Offshore Limited. [www.actoffshore.com]
Email: email@actoffshore.com

What is a shelf company?

Shelf companies are companies that have been previously incorporated and can be purchased “off the shelf”. They are also called ready-made companies and when they have been on the shelf for more than a year they are called ‘aged shelf companies’ or ‘vintage shelf companies’ (as in wine). Many types of companies from a number of jurisdictions can be bought from the shelf and the term ‘shelf’ only refers to the fact that the company has already been registered and is sitting ‘on a shelf’ waiting to be purchased.

Shelf companies can remain on the shelf for many years but it is very rare to find shelf companies older than 12 years. Shelf company specialists deliberately allow a certain number of companies to age so that they always have companies of all ages. The older the company the greater the investment by the seller in statutory fees and in keeping the company alive, and so few sellers are able to maintain large lists of aged shelf companies. Availability decreases with age whereas price increases.

A shelf company must remain on the shelf unused until purchase – this is very important. A shelf company must not have traded, must not have entered into any agreements, and the seller must be able guarantee that the shelf company does not have any existing obligations. If you buy a company that has traded or has entered into an agreement it is like buying a second hand car, and carries the same risks. If you buy a company that has been used, you are buying a business, not a shelf company – it is a business acquisition and you must carry out extra due diligence accordingly. A clean shelf company avoids this problem completely.

Shelf companies are usually formed with standard memorandum and articles (bylaws) and with very general objects to cater for the wide range of permissible activities. Authorised share capital is usually large, typically US$100,000 so that issued share capital may be anything between US$1 and the authorized maximum as needed. As well the memorandum and articles, certificate of incorporation, first minutes and registers, reputable service providers who specialise in shelf companies will also provide as part of the package, a certificate of non-trading guaranteeing that has not traded and has no liabilities up to the time of purchase.

A shelf company is good to go on purchase if the jurisdiction does not require public filings. The registers of directors, shareholders and secretaries and other officers can be updated privately by the seller (by addition, change or correction), allowing the buyer to take full control immediately. If public filings are required then there can be a small delay while changes are registered and the buyer may have to employ the sellers’ professional directors and nominee shareholders until the changes are filed.

The term ‘shelf company’ is sometimes confused with the term ‘shell company’. The latter is a company through which business transactions are put through but which has no significant assets and operations of its own. While a shell company is not in itself illegal (and there are legal uses of shell companies), it has acquired negative connotations because of its association with tax evasion, pump and dump schemes and other frauds. Any company can be used as a shell company including a shelf company but a shelf company is not necessarily a shell company. After purchase, the shelf company can acquire significant asset and can have operations of its own as it should.

After purchase a shelf company is like any other, especially once it has started trading and has established operations of its own. A third party may never know the company was bought as a shelf company unless it is revealed by the buyer.

Why would you want a shelf company?

Speed. When action must be taken immediately shelf companies are ideal, for example when an arrangement must be concluded while all parties are in the same room or when an asset must be transferred immediately. You do not have to go through the name application process. If you are a lawyer, accountant or other intermediary and the client’s preferred company names are rejected you would have to go back to the client until suitable names are approved. The chance that a shelf company would no longer be available when you get back to the seller is smaller. Additionally you do not have to wait for documents to be prepared. The buyer will usually be impressed with the efficiency and will be happy to get down to business immediately. Online incorporations may have reduced incorporation time considerably but getting a shelf company is still faster and you don’t have to grapple with an unfriendly website. You can send an email to a dedicated person and can even place the order over fax or phone when internet connectivity is poor.

Certainty. If you are an intermediary you can go into a meeting with a client armed with a shelf list knowing that the client is guaranteed to get one of the chosen names. This works better the longer the shelf list as there is less chance that the chosen companies would have been sold by the time you revert to the seller, but you could also pre-reserve five or 10 companies based on what you think the client will want. When your client makes a choice you can draw up agreements and business plans. This may also demonstrate preparation.

Making up for delays. If a partner or a client had asked for a company weeks or months ago but a company has not been incorporated, a shelf company can still give the required date. Perhaps an associate or your regular service provider procrastinated a little bit too long. A shelf company can rescue the situation. You get to keep your good reputation and the partner or client will be none the wiser. If the name is not exactly as was required a quick name change can put everything right.

Name. It is usually hard to think of good names when you are asked to. If you cannot think of a good name then you can pick one up from the list, already incorporated. If you pick a young shelf company then you will probably pay the same amount as a new incorporation, ie, there will be no aged company premium. Alternatively if the buyer is not concerned with the name and simply wants a company, and this is often the case if the company will be a simple holding company, you can simply pick any company on the shelf list. Shelf company specialists spend a lot of time thinking of good names or names with universal appeal.

Longevity. Aged shelf companies suggest longevity and at the very least show that the sellers have systems in place to keep a company alive for many years. It shows that statutory requirements have been met for a number of years and that the seller will be able to attend to future statutory requirements. An old incorporation date can be a very useful marketing tool as well. Some clients and suppliers prefer seemingly long-standing businesses over start-ups and pioneers and a shelf company allows you to legally state “incorporated since 1997” on your website, adverts and brochures.

History. The seller will have attended to filings or at least would have paid certain statutory annual fees on behalf of an aged company. This means the company will already have a history when purchased. Some contracts require bidders to have a history as do some banks, without asking anything more than the certificate of incorporation and other statutory documents. If you are as good or better than established businesses an aged company can allow you to bid for those contracts and apply for accounts with those banks. Common history thresholds are one or two years.

Smarter record keeping for better privacy, tax advantages and lower personal liability. A business owner may sign a contract in his own name only to later realize, perhaps after discussing with his accountants or lawyers that for avoidance of personal liability it would have been better if a company had been used instead. Expenses or assets paid by the business owner as a sole trader can be treated as expenses or assets of the company paid by the business owner via shareholder’s loans. Essentially a shelf company can be used to merge the business owner’s history with that of a company so that the shelf company adopts the business owner’s transactions and obligations.

Where and how to get one?

An internet search will quickly reveal sources from all over the world including the UK and a number of US states such as Delaware and Wyoming. Your existing corporate service provider may have a small shelf list but it is usually best to buy shelf companies from a provider that is in the business of shelf companies (more on this later). Shelf companies are also available from international financial centres such as the BVI and Seychelles, often for lower prices.

International financial centres such as BVI and Seychelles also have the advantage of not requiring filings to register the buyer’s directors and other officers allowing the company to be fully operational immediately on purchase.
Getting one requires little more than emailing or faxing the service provider and picking a company from the given list. If you are buying from the service provider for the first time, you will most likely have to register with that service provider and undergo a due diligence procedure. Your first purchase may be slightly delayed because of this but a friendly provider may give you the company documents on receiving faxed or scanned due diligence documents and payment. A pre-registered buyer can have a shelf company within minutes of asking, in advance of payment.

Cost Considerations

The price of a shelf company usually increases with age. This is because an older company requires more years of maintenance. The older the company, the more statutory fees the seller will have paid. Older companies are also rarer as sellers maintain less and less companies as they get older and usually only continue to maintain the ones with the best names. Like with wine, vintage is more expensive.
Since cost increases with age, you should only get a company that is as old as you need. If speed or name is the only reason you are getting a shelf company then you may as well get a one that is days or weeks old only. If you shop around you can get a young shelf company for US$900 or less and a one year old aged company can be purchased for around US$1500.

Potential Pitfalls

Some shelf companies are sold with add-ons such as bank accounts, merchant accounts and credit records for a very high premium. Such companies will have been represented by the seller at more than one place (the company registry) and their history will have more of the sellers participation than a simple shelf company. It is always prudent to get the history of the add-ons as well, for example all bank statements, to ensure that the seller has not allowed another party to use the account at any time. The more add-ons, the more risk, and the more due diligence that is required by the buyer.

Some shelf companies are sold with credit schemes as the primary attraction. Those particular sellers promise instant credit profiles and guaranteed loans. The idea is that an individual or business with a bad credit history will be able to obtain corporate credit via the aged shelf company. It is reported that many such sellers fail to deliver and that the profiles are ineffective. Lenders are increasingly thorough and so should you when eyeing a shelf company in the hopes of getting easier loan financing.

A shelf company can allow you to enter a current transaction or event in the company’s records but with an older date. This can be very tempting but also dangerous. It is called ‘backdating’ and if the transaction or event relates to other transaction or events and the dates to do not correspond you could be found out. As a lawyer once told me “we record now what happened then but we do not backdate”. Backdating is not recommended.

It is possible that the seller will not have kept the shelf company up to date and will sell you a company that is not in good standing or even a company that is struck off. Particularly if you are buying from the seller for the first time and the seller is not a reputable shelf company specialist it is prudent to ask for proof of current standing. The seller must be able to quickly provide a certificate of good standing from the company registry.

Some sellers offer second hand companies and pass them off as shelf companies. Second hand companies may not be clean and may have been used by a previous client. Without the sellers knowledge they may have opened bank accounts for the company and they may have signed contracts before returning the company to avoid paying the service providers incorporation fees. If you buy such a company you may also be buying hidden liabilities and someone else out there may have yourcompany documents. In their attempt to recoup costs many non-specialist service providers have small shelf lists of consisting of 10 or 20 returned companies.  Good shelf company specialists will not want to damage their main line of business.


A shelf company is a very powerful tool with some unique benefits for professionals and their clients. Like any powerful tool the possibility for misuse and mishaps exists but risks can be reduced by choosing a reputable shelf company specialist providing clean companies. A shelf company purchase does not have to be expensive and by buying simple shelf companies without special add-ons you may save on cost and reduce risk. I hope this quick introduction will encourage you to explore shelf companies further and offer them as a solution when appropriate.



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