Purchase of a Company
Would you like to open a business in Cyprus? If so, you need to learn about and evaluate the different ways in which you can legally start your own company. Of course, one option would be to register a new business venture on your own. But did you know that you can also open a business by buying a shelf (or pre-registered) company? In general, these companies are created only to be sold to entrepreneurs. This means that they have no assets, liabilities, and no previous economic activity either.
In this article, you will learn what a shelf company exactly is as well as the benefits of opening a business in this way. We will also have a closer look at the paperwork you’ll be required to complete if you decide to purchase a shelf company. In the last section of this article, you will also find practical information on where to look for these companies and how to successfully complete the process of registration.
What is a Shelf Company?
A shelf company is a non-active company or dormant company. It has never been involved in economic activities or trade. Therefore, it has no tax liabilities or VAT tax to pay.
This type of pre-registered business entities receive the name of shelf companies because once created, they are “shelved”, as it were, waiting to be purchased. These companies are pre-named and they have a legal address in Cyprus.
After the purchase, the legal ownership of the shelf company is instantaneously transferred to the client/buyer. Additionally, the new owner can immediately start using the company for commercial ends and activities.
A. A Shelf Company’s Characteristics
Not only is a shelf company a pre-registered company, but it also has specific features that are exclusive to these ready-made companies. These include having a legal structure with a shareholder/director as well as an appointed secretary. On the other hand, the company has no bank account associated with it or VAT number.
Every company registered in Cyprus must appoint a director and declare who this person is in the Cyprus Company Register . However, a shelf company must also appoint a shareholder at the time of the registration. The shareholder is known as the “real owner” or “ultimate beneficial owner” which means that they own the company’s shares.
In addition to a shareholder, a shelf company must have a secretary appointed at the time of the registration. The secretary can be either a legal entity or a private person depending on the chosen business structure.
A shelf company does not have a bank account associated with it. This, in turn, means that it has neither assets nor outstanding liabilities. Nevertheless, if needed, a bank account can be opened in just a few days after the company has been purchased.
Lastly, no VAT registration number or VAT tax to pay is registered because, at the time of registration, the company has no trading activities. The VAT number can be acquired within 48 hours after the buying process is completed.
B. What Are the Benefits of Purchasing a Shelf Company?
There are several great benefits of purchasing a shelf company. Here is a list of the most important advantages:
- The purchase can be made quickly - in comparison to a standard registration process, you will save a lot of time. In fact, you can acquire a shelf company in just one day
- The company already has a registered name in the Cyprus Company Register . That will save you a lot of paperwork and bureaucracy
- You’ll be able to obtain a VAT registration number as soon as you buy the company - which means you can start your business activities right away
- Once you’ve acquired the company, you’re free to introduce any legal or structural changes you may need or want
- A shelf company pays no corporate taxes
- Opening a bank account for a pre-registered company takes less time than it is the case for a completely new entity business
- Access to the company’s history- You will know who owned it first, if it has a previous economic activity and, based on this data, you will be able to decide if this company is the best fit for your interest.
How to Find a Shelf Company
As purchasing a shelf company is a significant investment, it is necessary to consider all the legal and financial aspects of this transaction. To complete this process successfully and without any unpleasant surprises, you will need the help of a local accountant who will guide you through the complexities of the local financial market and advise you on how to proceed with the purchase.
Working with your accountant, you will be able to study and research the companies available for purchase as well as the market situation in general. You also need to get information on your potential competition and the value of the goods or services that the company to be acquired might be selling.
You can find shelf companies available for purchase on local websites, in magazines or directories. Make sure you search for entities that suit your needs, in locations that you find attractive and convenient for your business. The best way to go around such a purchase is to hire or consult professional advisors to ensure you won’t waste your time or money in the process.
Purchasing and Registration Process
The process of buying and registering a shelf company in Cyprus is simple and can be done in a short time. Interestingly, your physical presence might not even be required; a
can handle the paperwork for you.
These are the basic steps you will need to take to successfully acquire a shelf company in Cyprus:
- Choose a shelf company to purchase
- Make the corresponding payment following the sellers’ instructions
- Present a copy of your ID/passport and a utility bill under your name
- Appoint a director/shareholder (physical or legal person) and a secretary
- Provide a VAT number, the Memorandum of Association and the article of Association.
- Open a bank account: As stipulated by Cyprus’ Company Law, you must open a bank account to start your business activities and deposit the share capital in it.
- Finally, the company should be registered with the Ministry of Labour, Welfare and Social Insurance .
Important Information on Registration Paperwork
It is important to highlight that this documentation must be submitted to the Companies Sections of the Department of Registrar of Companies and Official Receiver . To get your tax registration number and a VAT number, you should send an application to the Ministry of Commerce .
The Memorandum of Association must establish the name and the purpose of the company, the address of the registered office, the share capital with its subscribers and the number of shares. The Article of Association must state the voting rights of the company’s members and name the general staff, company’s accounts, projected audits, as well as state the appointment of the managing members.
It is advisable to hire a lawyer to help you with the preparation and notarization of the Memorandum of Association and the Article of Association.
As you can see, purchasing a shelf company can be an excellent opportunity to acquire a company that allows you to save time and money you’d have to dedicate to opening a new one. Additionally, after the purchase, you will be able to start using your company towards your commercial goals and activities immediately.
Pre-registered or ready-made shelf companies are safe, legal, and have no assets or outstanding liabilities. After purchasing a shelf company, you will be able to open a bank account and get a VAT number right away. Then, you can make all the legal changes needed to run your business as you please.
When considering buying a shelf company, we recommend that you work closely with professional lawyers from the very beginning. It will help you avoid any unnecessary inconvenience. A lawyer will also help you prepare and present any required paperwork such as the Memorandum of Association and the Article of Association which is essential for the registration process.