China Shelf Company
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.
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 show corporate longevity in order to attract consumers or investors.
· To gain access to corporate credit.
These reasons are open to criticism. Many years ago, it would take months to properly incorporate a business. However, it is now quite easy, at least in Australia, Canada, the United States andWestern Europe, to do so. In fact, it can now be done in as little as a couple of hours in some jurisdictions. A corporation might end up "on the shelf" precisely because of a bad business history. It is questionable whether a shelf corporation improves access to capital, since creditors and investors look into a company's history as part of due diligence.
A number of consortia "produce" and sell shelf corporations, promoting the fact that the new buyer can at the same time have a corporation with a long history, and yet have complete control over the establishment of the corporation's board of directors and shareholder profile.
One item to be aware of is the re-aging of the shelf corporation. If the credit bureaus learn about the company being under new management, they will list it on their reports, effectively "re-aging" the company.
The people trying to sell their shell WFOE usually pitch it as being completely liability free and therefore ready to go much faster and at a much lower price than if someone were to have to form their own WFOE.
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