A shelf company, also known as a ready-made or aged company, is a business entity that has been pre-registered but remains inactive until it is sold to a buyer. Here are some key points to understand about shelf companies.
Advantages of Shelf Companies
Time Efficiency: Since the company is already registered, it allows for immediate business operations, bypassing the incorporation process. In some instances, new incorporation may range from 14 days to 2 months, depending on the complexity of the approval and the authority in question.
Credibility: An existing company with an older UEN number can appear more established, which may be beneficial for securing contracts or business relationships. This has been more prevalent when it comes to government contracts.
Reduced paperwork: The necessary incorporation documents have already been prepared, requiring only minor amendments.
Things to take note
The purchase generally involves verifying the company’s liabilities, negotiating terms, signing a transfer agreement, and potentially changing the company’s name, address, directors, and shareholders. If there is any existing corporate bank account associated with the shelf company, the bank needs to be informed of the change in ownership of the shelf company. The bank will then proceed to update the corporate bank account’s controlling rights based on the new owners’ instructions. If there are excess funds in the corporate bank account, the account controller should ideally clear out the account or factor this amount in addition to the agreed purchase of the shelf company.
The shelf company’s secretary and registered address can be changed or kept the same as before. Likewise, the compliance requirements of the shelf company remain unchanged after the switch of owners of the shelf company.
It is advisable to perform due diligence on the shelf company before committing to the price of the takeover. The cost of purchasing a shelf company in Singapore ranges from S$2,500 to S$20,000 depending on the company’s age and services included in facilitating the takeover. Such due diligence can include ensuring the company is free of debts or financial obligations, and that the company has met all statutory requirements to avoid legal complications.
Although the company name can be changed upon the takeover, the previous name will still appear on the business profile under the prefix f.k.a. (formerly known as). The business profile is public information where the anyone can pay a small fee to purchase such information. It is useful to ensure the previous company name and past activities do not carry a poor reputation which could impact your business under the new name.
If you are exploring the possibility of acquiring a shelf company, approach us for a non-obligatory discussion.