A shelf company is a company that has not traded and historically has had no activity. In the past it could take up to two weeks to incorporate a company, yet people often needed a new company quickly, so providers of company registration services would register companies and have them 'sitting on the shelf', ready for sale when required.
Although today companies are incorporated within a few minutes, shelf companies are still used for the following reasons:
- To show corporate longevity – this provides confidence to investors and consumers.
- To bid on contracts. Some jurisdictions require that a company be in business for a certain length of time to be eligible to bid on a contract.
- To gain access to corporate credit.
- For Australian immigration purposes – companies are required to have been in business for several years before they can sponsor an immigrant.
- Contact shelf company provider and review companies for sale. Consider their incorporation date (age) and name.
- Transfer the shelf company's shares to the buyer, and arrange for the resignation of the directors of the original shelf company, who would be replaced by the new directors (the purchaser or their nominated agent/s).
- Consider whether the shelf company name needs to be changed by the buyer.
"You’d be stupid not to try to cut your tax bill and those that don’t are stupid in business"
- Bono: U2