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What is a Shelf Company and How to Buy One in Singapore?

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Are you considering incorporating a company in Singapore but don’t want the hassle of starting from scratch? One of the best alternatives you can consider is purchasing a shelf company.

Purchasing a shelf company can be a better option for those who want to avoid the tedious requirements of incorporating a company in Singapore.

What is a Shelf Company?

A shelf company is a legally established business entity that exists and is registered but remains inactive, with no business activities or income until it is purchased by a buyer who intends to commence business operations.

Typically, shelf companies are incorporated with minimal requirements such as a paid-up capital of S$1, a resident company secretary, a nominee director, and a single shareholder.

The purpose behind creating a shelf company is to sell it to individuals who are eager to promptly initiate their business endeavors. The primary appeal of a shelf company is its swift facilitation for business operations, allowing buyers to bypass the hassle of registering a business in Singapore.

The acquisition of a shelf company typically takes only a few days. Afterward, you can make necessary amendments to the essential information in the articles of incorporation.

Advantages and Disadvantages of Buying a Shelf Company in Singapore

Advantages

  • Time and Convenience: Setting up a new company can be time-consuming. With a shelf company, you can skip some of the initial bureaucratic processes such as incorporation, appointing a director, finding a resident secretary, and other necessary steps.
  • Established Image: Having a company with an older registration date can create a more established image, potentially boosting credibility with clients, partners, or investors. Newly incorporated companies are essentially unknown, requiring more time to gain trust.
  • Increased Business Credibility: Each company in Singapore has a Unique Entity Number (UEN) as its registration number, and the first four digits of the UEN denote the year of incorporation. An older registration number can help increase business credibility among stakeholders by creating the impression that the company has been in operation for a longer duration.

Disadvantages

  • Costly: Shelf companies often come at a higher upfront cost compared to starting a new company. The price usually ranges from S$2,000 to S$10,000, but it can be higher depending on the date of incorporation.
  • Limited Customization: While the company is technically yours after purchase, it might come with a predefined structure. If you were hoping for a specific setup or brand identity, a shelf company might not provide the flexibility you need.
  • Potential Inherited Issues: The shelf company might have some history, and you might inherit any existing liabilities, legal issues, or debts associated with it. It is crucial to thoroughly vet the company’s background before purchasing.

How to Buy a Shelf Company in Singapore

Below is a comprehensive step-by-step guide for purchasing a shelf company in Singapore:

Step 1: Assess the Pros and Cons

The first step is to evaluate whether a shelf company aligns with your business needs and preferences. You have the option to form a new company in Singapore, so it’s important to weigh all the benefits and drawbacks of purchasing a shelf company.

Step 2: Engage a Professional Consultant

If you lack knowledge of incorporation processes in Singapore, it’s essential to seek help from reliable corporate service providers. Experts at firms like Wealthbridge can help ensure adherence to all legal prerequisites of acquiring a shelf company in Singapore, making your journey of building a business easy and hassle-free. Choosing the right business consultant is important as you will rely on their expertise for compliance, background checks, negotiations, and legal matters.

Step 3: Verify Company Profile and Compliance

Despite being dormant, a shelf company must comply with all the legal processes established by ACRA. You should check the chosen shelf company’s details with ACRA and confirm its business structure. Verify compliance with AGM, accounting, annual returns, financial statements, and corporate tax filings. Additionally, check its online presence to ensure a positive reputation and prevent any future issues.

Step 4: Negotiate and Sign the Sale-Purchase Agreement

Engage in negotiations with the owner of the shelf company regarding the pricing and any support they can provide with the ownership transfer process. The business owner must affirm that there are no outstanding liabilities associated with the shelf company. Before finalizing the agreement, thoroughly review and understand the sale-purchase agreement to ensure all potential risks have been addressed.

Step 5: Transfer Ownership

After completing the sale, you can assume full ownership of the shelf corporation.

Step 6: Amend Articles of Incorporation

Once the company is fully yours, you can modify the constitution, directors, shareholders, and even the company name if needed.

Step 7: Register Company Updates

If you make changes to the company, such as changing its name or location, inform ACRA of these updates. This is crucial to ensure compliance with statutory requirements.

Step 8: Open a Singaporean Bank Account

To ensure smooth business operations, establish a corporate bank account in Singapore. Once you have registered the company in your name, the next step is to open a corporate bank account.

By following these steps, you can smoothly acquire and customize a shelf company in Singapore to suit your business goals while ensuring legal compliance.

In conclusion, buying a shelf company can be a strategic move for those looking to expedite their business setup process in Singapore. With careful consideration and the right professional guidance, you can leverage the advantages of a shelf company to kickstart your business operations in one of the world’s most vibrant financial hubs.

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