If you may have arrange or are fascinated about establishing a UK limited company, you could have come across the term ‘shelf company’. On this post, we’ll explain what shelf corporations are, why someone might need to buy one, why we predict you’re higher off starting your individual company from scratch, and more. Let’s jump in.
What’s a shelf company?
A shelf company is a limited company that has been pre-registered with Companies House (the UK’s registrar of corporations) for the aim of selling it on at a later date.
Shelf corporations are also sometimes called ‘off the shelf’ or ‘ready made’ corporations.
What are the advantages of a shelf company?
Shelf corporations were particularly popular when the method for registering a UK limited company was accomplished via paper documentation quite than the web method with which we at the moment are familiar.
It typically took a lot of weeks for a corporation to be formed and rejection rates were considerably higher than they at the moment are, as mistakes were more commonplace when using paper documentation.
Shelf corporations appealed as business owners could circumnavigate lengthy formation times and the chance of rejection (and in turn, an excellent longer formation time).
Now, the flexibility to form an organization online in a matter of hours via an internet ‘wizard’ that walks you thru all the formation process (and so reduces the likelihood of the appliance being rejected) has all but eliminated this profit.
An arguable advantage that does still stand, is that a shelf company can provide a way of stability and prestige, as the corporate has been in existence for a time frame.
This may occasionally appeal to business owners who wish to offer the impression that their business is older than it’s, and never a brand latest endeavour.
How are shelf corporations formed?
Shelf corporations are primarily formed by company formation agents (whilst we’re an organization formation agent, we don’t sell shelf corporations). The incorporation process for a shelf company is precisely similar to for an everyday company.
Regarding the specifics of the formation:
- The chosen company name can be generic, providing no insight into the industry or geography
- The director and shareholder (corporations are formed with the minimum variety of appointments) are generally individuals employed by the agent who may have no actual relationship to the corporate being formed – they’re simply placeholders
- The registered office address can be the address of the agent
- The SIC code, this being the reference that’s used to define the corporate’s industry, is generally set as 74990 (non-trading company), 82990 (other business support service activities n.e.c.), or 99999 (dormant company)
- Firms are formed with a straightforward share structure of 1 strange share value £1.00
- The Model articles of association are implemented
Once a shelf company has been registered with Firms House, the business liable for its formation will keep the corporate compliant by:
They may proceed to keep up the corporate for so long as it’s under their ownership.
How does a shelf company service work?
The agent will normally advertise their available pre-registered corporations on a dedicated page on their website. This can typically include the corporate name, the date of incorporation, and price. The older the corporate, the more you may expect to pay. Older corporations are sometimes known as ‘vintage corporations’.
Once a customer has chosen an organization and made payment, they can be asked for the next information:
- Registered office address for the corporate
- Director information (name, date of birth, nationality, occupation, residential address, and repair address)
- Shareholder information (name and repair address)
- Latest company name (sometimes but not all the time)
Once the agent has this information they may:
- Update the present registered office to the brand new address
- Resign the prevailing director and appoint the brand new director
- Arrange the transfer of the share from the present shareholder to the brand new shareholder
- Update the corporate name (if that is included as a part of the service)
What are the disadvantages of shelf corporations?
The disadvantages to shelf corporations far outweigh the advantages.
As highlighted, the one aspect of shelf corporations that could possibly be considered a positive is that they permit an organization to convey a way of longevity. Nonetheless, not only is that this misleading, but additionally it is something that may be uncovered relatively easily via the Firms House ‘Search the register tool’.
In only just a few clicks, any interested party could see the corporate’s previous information (registered office, director, and shareholder) and conclude that the corporate was a shelf company.
On this instance, we argue that transparency is one of the best policy, and that it’s higher to be latest and honest quite than old (at first sight) and dishonest.
You furthermore mght need to think about the benefit with which a limited company can now be formed. It’s legitimately now tricker and longer to tackle a shelf company than it’s to establish your individual company, which may be done in only just a few hours. Especially when you think about the method for accurately transferring shares from the ‘placeholder’ shareholder to the brand new shareholder.
Whilst on the subject of shares, it’s also vital to spotlight that while you form your individual company, you may select a share structure that suits you. Whether you may have a sole shareholder who wholly owns the corporate, two shareholders with an equal split, or multiple shareholders with different allocations – you may select the right structure at incorporation. You is not going to should undergo the lengthy means of transferring and adding latest shares.
After which you may have the corporate name. As mentioned, shelf corporations are formed with generic names that give little away. But identical to the registered office and director appointments, even in the event you do change the corporate name – the unique will all the time appear on the general public register. This might raise questions for any person or business seeking to work with you in some capability. So, why not incorporate your latest company with the proper name straightaway?
Form your organization the best way you would like to, now
Our company formation services take all the trouble out of registering a limited company with Firms House. In only 4 easy steps you may get your corporation up and running:
- Pick the corporate name that’s right for your corporation
- Pick from our range of company formation packages, with prices starting at just £12.99
- Make payment
- Enter your organization information in the course of the quick online application form
Your organization will generally be formed in 3 to six working hours, depending on the Firms House workload.
Thanks for reading
You need to now have a radical understanding of shelf corporations and why, as a service, they might now be considered outdated.
We hope you may have found this post helpful. Please leave a comment if you may have any questions and we’ll get back to you as soon as possible.