Shelf Company: What It Is and How to Buy One in Singapore
A shelf company is a legal entity that is created and operational but remains dormant (i.e. it does not carry out business activities and has no income) until such a time where a buyer purchases the shelf company to carry out business.
These shelf companies are normally incorporated with a paid-up capital of S$1, a resident company secretary, nominal director and a single shareholder with one share. Shelf companies in Singapore may be purchased by foreigners as well since foreign shareholders may hold 100% of the company’s shares.
Upon purchase, the shelf company may be operational immediately.
Benefits of Buying a Shelf Company
You bypass the registration process
Crucially, setting up a new company requires the incorporation of the company with the Accounting and Corporate Regulatory Authority (ACRA). This includes making arrangements for a director and qualified secretary ordinarily resident in Singapore, a local Singapore address and a SingPass or CorpPass ID for the online incorporation procedures.
By buying a shelf company, you will be able to bypass the regular registration process for the incorporation of a new company and start operations immediately. (This is subject to any changes you may need to make to the company after buying it, as will be discussed below.)
You may spend less time preparing the required incorporation documents
The incorporation of a new company will include preparing documents such as a shareholder agreement and a company constitution. Since the required documents had already been prepared upon the shelf company’s own incorporation, you only need to amend them to suit them to your requirements. This process may not take very long if the documents don’t need major amendments.
As a result, you would be able to obtain a fully operational company sooner and can hence comply with any requirements for bidding or entering into a contractual relationship with other parties quicker.
You may find it easier to obtain business loan approvals
Shelf companies which have an established longevity and operating history have increased chances of loan approval from local banks and potential investments. This is because businesses and individuals feel more confident dealing with companies that have incorporated for a longer period of time.
For instance, most bank lenders require a minimum of 2 to 3 years of history after incorporation in order to approve corporate credit. Large companies will also prefer having business relationships with an older company rather than a brand new company.
Cost of Buying a Shelf Company in Singapore
In Singapore, shelf companies may cost from S$2,500 to $20,000 depending on the services included with the sale and the date of incorporation of the shelf company. Older companies tend to be more expensive.
How to Buy a Shelf Company in Singapore
Choosing your shelf company
The process of buying a shelf company starts with choosing the company you want to buy.
For example, you may want to choose your shelf company based on its date of incorporation. As mentioned above, the older the shelf company, the more expensive it generally tends to be.
You may also choose your shelf company based on its name. However, do not worry if you cannot find a shelf company with a name that you like.
This is because you can change the company’s name later. The seller might also offer this name-changing service for free.
Negotiating with the seller
There are many companies that sell shelf companies with the provision of additional services. You can negotiate with the seller for the inclusion of more value-added services. Some offer a company name change at no charge (as mentioned above) or assistance with opening a Singapore bank account. During negotiations, most sellers also ensure that there are no debts or liabilities incurred by the shelf company in question.
Signing the transfer agreement
A contract, known as the contract for sale, will be drafted to transfer the ownership of the shelf company from its existing owner to you.
After signing the contract of sale, the shares in the shelf company will be transferred to you or your appointed persons. The new shareholders will then be the new owners of the shelf company.
After Buying Your Shelf Company
Making any necessary changes to the company
You may want to consider the changes that need to be made to the shelf company after you have bought it. This includes:
- Changing the company’s name, registered address or corporate bank account
- Appointment of new directors
- Resignation of the existing directors
Further, you could amend the company constitution if you wish to include particular provisions in it.
Changes to the company’s name or address, directorship, shareholder particulars and constitution should also be updated with ACRA through the BizFile+ website.
Complying with statutory obligations
While the shelf company is dormant, its seller (the original owner of the company) should have strictly complied with all statutory requirements so that the shelf company will be operational immediately.
After buying the shelf company, you must continue to abide by these same obligations.
These statutory requirements include:
- Determining the start and end of the company’s financial year
- Convening an Annual General Meeting (AGM) every calendar year
- Accounting requirements
- Annual financial statement filings
- Annual returns filing
- Corporate tax filings
For more information, you may refer to our article on regulatory compliance obligations for Singapore companies.
If you wish to purchase a shelf company in Singapore, you should get in touch with a corporate services firm which will assist you with the buying process and any relevant formalities to be complied with in respect of the purchase.
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