The main advantage in acquiring a shelf company is saving time. A company’s start-up period can be circumvented by acquiring a shelf company and the purchaser receives a company which is capable of acting within a very short time.
Less liability risks in acquiring shelf companies
When establishing a new company it must be noted that a lot of time will pass until the company is entered into the Commercial Register — depending on the workload of the courts and in case of any approval requirements of other institutions like the Chamber of Commerce or the Chamber of Crafts. During the period until the company’s entry into the Commercial Register is made, the company’s shareholders bear unlimited liability with their business and personal assets. The period until the entry of the amendment of the company’s bylaws is made when acquiring a shelf company is often shorter compared to the period of time until a newly established company is entered into the Commercial Register.
Therefore, the period of time until the company’s entry into the Commercial Register is reduced and, with the entry, the shareholders’ liability cease. As a consequence liability risks are decreased.
Anonymity in the Spanish Commercial Register
Another advantage is that only founding members/partners of the company are announced in the Spanish Commercial Register. Subsequent disposals of the company do not become public knowledge and are not recognizable or transparent. This creates a certain anonymity.
Acquiring a used shell company
The acquisition of a used shell company entails high liability risks because of its previous life. In comparison, acquisition and use of a shelf company is less risky. The majority of its capital resources is still available at the time of economic re-establishment, generally only reduced by start-up expenditures and insignificant bank charges.
Nevertheless, the risk remains that the shelf company has obligations to third parties or that a loaning of capital has taken place between the company’s formation and its subsequent sale.
Avoiding risks in acquiring a shelf company
To avoid risks, one ought to take a careful look at the vendor of a shelf company prior to the acquisition.
It should be noted that there will be extra service costs when acquiring a shelf company.
Accordingly, given the amount of time saved, the acquisition of a shelf company might be an interesting alternative to establishing a new company.
To sum up, the following three points should be emphasized as advantages of acquiring a shelf company:
- saving time
- less risks
- more anonymity
Catharina Jung & Karl H. Lincke
This article is not considered as legal advice