In formal legal terms, a shelf corporation, shelf company, or aged corporation, is a company or corporation that has had no activity. It was created and left with no activity – metaphorically put on the “shelf” to “age”. The company can then be sold to a person or group of persons who wish to start a company without going through all the procedures of creating a new one.
The common reasons for buying a shelf corporation include:
- To save the time involved in taking the steps to create a new corporation.
- To gain the opportunity to bid on contracts. Some jurisdictions require that a company be in business for a certain length of time to have this ability.
- To give a false appearance of corporate longevity in order to attract consumers or investors.
- To gain access to corporate credit.
It is now quite easy, at least in Australia, Canada, the United States and Western Europe, to incorporate a company. In fact, it can now be done in as little as a couple of hours in some jurisdictions.
A company is a separate legal entity created once ASIC enters it into its database through a process called “registration”. Its’ profits, losses, assets and liabilities are its own. The company is owned by its’ members (the shareholders) and run by the director (or directors). As per the Small Business Guide (www.shelco.com.au/smallbusinessguide.htm), a company has all the powers of an individual including the right to:
Own and dispose of property and other assets;
Enter into contracts; and
Sue and be sued.
Once ASIC registers the company a ‘shelf company certificate’ is issued with a company registration number, referred to as the Australian Company Number or “ACN”. This is the primary form of company identification. You can change the company’s name at any time through a vote by the shareholders but you must keep the ACN. Shareholders are not liable for the company’s debts. However, a director of a company may be liable for debts incurred by the company at a time when the company itself becomes unable to pay those debts. You should contact your accountant or solicitor to discuss which company structure is most appropriate for you.