Template:Companies law 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 create an appearance of corporate longevity, which may boost investor or consumer confidence.
- To gain access to investment capital.
- To gain easier 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 and Western 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 only way to avoid this is to make sure the credit bureaus do not find out.
- Michael Spadaccini, Incorporate Your Business: In Any State (2007), p. 253.
- Mark William Walma, Patricia McCann-Smith, The Fundamentals of Corporate Law and Procedure (2000), p. 54.