Shelf Company / Shelf Companies Explained
Definition: A shelf company is a company that has not traded and historically has had no activity.
Back in the 'good old days', it took quite a while to create (or 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.
While these reasons may be open to criticism, some common reasons for buying a shelf company include:
- To save the time involved in taking the steps to create a new corporation.
- To bid on contracts. Some jurisdictions require that a company be in business for a certain length of time to be considered.
- To show corporate longevity in order to attract consumers or investors.
- To gain access to corporate credit.
Someone wanting to create a company fast could buy one of these off-the-shelf companies (or shelf companies as they are more commonly termed) quickly and easily. All that was required for a buyer to purchase a shelf company was for the provider to 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). Sometimes, the shelf company name would also be changed by the buyer.
With the advent of high-tech company registration services such as Cleardocs, it's no longer necessary to wait long time periods to create a new company, so the shelf company business has died down considerably. There is now significantly less administrative hassle and expense in the creation of a new company (compared to purchasing a shelf company) because there is no need to change directors — you can change the name of the company, transfer shares and pay stamp duty on the shares transfer.
For more information about registering an Australian company, visit our Company Registration page. You might also find this explanation why Cleardocs is different to other Company Registration services in Australia helpful.
Cleardocs offers instant online registration of companies and other documents to maintain companies. We have a direct link to ASIC, which means your company documents are checked and approved online with minimum waiting. All Cleardocs master documents are written in plain language and are signed-off by our lawyers at Maddocks. All the legal and related documents emailed to you instantly. This is one of the main reasons that Cleardocs is used by more than 10,000 professional firms on behalf of their clients.