A shelf company has already been established but has never traded or done business and has no assets or obligations. In essence, the firm is registered to sit on a shelf,' waiting to be purchased. Buying a shelf company used to be the best way to get a company quickly without going through the time-consuming process of forming one from scratch. However, purchasing and changing a shelf company is now much faster and more expensive than registering a company. As a result, shelf company in Canada are quickly becoming obsolete. This article explains what shelf companies are, how they work, and why they are becoming less common over time.
The Origins of Shelf Company in Canada
Previously, forming a corporation required a significant amount of time and effort. Many people couldn't wait for their firm to be registered and needed to start as soon as possible.
As a result, solicitors, accountants, and specialist company formation services would hold stock of corporations ready to be purchased as a pre-registered company on the proverbial shelf.' These are known as "shelf firms" (or "shelf corporations")
Companies that buy shelf space
When a client buys a shelf company, the shelf company's providers may need to make modifications, which could include:
- Transferring the shelf company's shares to the nominated purchaser;
- changing the company's registered address to a new address chosen by the purchaser:
- replacing present directors with new directors chosen by the buyer (current directors must resign as part of the process);
- as well as changing the company's name to one chosen by the buyer.
A standard constitution was usually used to register shelf firms. As a result, after making their acquisition, the buyer must make any necessary revisions to the constitution.
One of the most important advantages of buying a shelf company was the time savings for many people.
Rather than starting a new business, many people chose to buy an existing one off the shelf. This allowed them to:
- Start their firm right away;
- have quick access to third-party equity and corporate debt financing (from investors and banks, for example);
- and be ready to bid or enter into contracts sooner.
Others bought older shelf companies in Canada believing that an established company would be more appealing to future customers. Customers, banks, business partners, and investors are examples of this clientele.
As a result, the appearance of a business history would provide the company with more credibility.
Creating a New Business - Shelf Corporations for Sale in Canada
Incorporating a new business in Canada is significantly easier and faster nowadays. As a result, registering a new corporation rather than purchasing a shelf corporation for sale in Canada is increasingly common. Furthermore, setting up a corporation with specified features rather than changing features is also significantly more efficient and less demanding. For example, if you're starting a new business, you can choose from the following options:
- firm name;
- registered office and principal place of business location information;
- Shareholders;
- amount and kind of shares issued to each shareholder
- and the company's directors and corporate secretary
Many new businesses have a standard constitution when they register. There is, however, nothing that prevents you from crafting a custom constitution.
Furthermore, starting a new business with shelf companies for sale in Canada is less expensive because you only have to pay for the initial fees. You must pay for both the company and the fees of transferring the company to you if you purchase a shelf company. As a result of these factors, the shelf company registration market has slowed significantly.