A shelf company is a registered legal entity that is operational but is dormant. Being dormant, it has no income and does not carry out any activities. It does have all the basic structure of a legal entity. It has a registered local address, local director, shareholder and company secretary. Typically, shelf companies have a paid-up capital of SGD$1 or some other low amount. Buyers may buy the shelf company and start operation immediately.
Some shelf companies may be older operating companies whereby the owners and officers decided to stop business for the time being or for good but to maintain the company just in case they would like to reoperate at a later date. Some never do and eventually, these companies may end up being sold to buyers looking for shelf companies. It would save the directors of that company the hassle of striking off the company.
Benefits to buying a shelf company
- It is faster to start businessIncorporating a new company takes time. You will need at least one local director, a company secretary and a registered office ready when incorporating a company. You may also need to draft a constitution to suit your model of business and possibly have a shareholders’ agreement in place if there is more than one shareholder. Once the company is incorporated, you will need to open the bank account for the company and this process may take some time. If you need to start business immediately and need a live company with an operating bank account, a shelf company may be a much quicker option. Once you take over the shelf company you can also put in place your constitution and shareholders’ agreements in place of the existing ones in the shelf company.
- The possibly older company registration number may have its benefitsEvery company has a company registration number of unique entity number (UEN). The first four digits of the UEN are the year in which the company was incorporated. Thus some buyers may choose to purchase a shelf company for the reason that the shelf company has a UEN that reflects an older incorporation date. Businesses may not be able to tell that the company has been operational for a short period of time with the older UEN.
- It may be easier to apply for loans and grantsIn some cases, bank loans and grants may only be available for companies which have been operating for a certain number of years. The banks and government agencies responsible for the grants may require the items like financial statements which are only available at the end of each financial year.
How to buy a Singapore shelf company
You can contact a corporate secretary if you are looking to purchase a shelf company. Corporate secretaries may have contacts to company owners who may want to dispose of their older company. You can also be specific about your requirements like the age of the shelf company. The older the shelf company the more expensive it tends to be. You can change the name of the shelf company at a later date as well.
You should also ensure that the ex-owners of the shelf company will facilitate the transfer of the bank account properly to you. The ex-owners must also ensure that there are no debts or liabilities incurred by the shelf company.
Once all the terms are agreed upon, a share transfer agreement will be drafted and signed and the corporate secretary will facilitate the changes.
After the shares of the shelf company are transferred, the company can effect changes like the changing of company name, removal and appointment of directors, adoption of new company constitution and other related matters.
If you are looking for a shelf company, do contact us via email at [email protected].
When in doubt, seek legal advice or consult an experienced ACRA Filing Agent.
The editorial team at Singapore Secretary Services
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