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Are you looking to incorporate your business into a company and unsure what options are available to you?
This article will explain how to incorporate a business into a private company using a shelf company and how this differs from tailor-made companies.
What is a Shelf Company?
All companies in England and Wales come into existence when they are registered with Companies House and the Registrar of Companies issues the company with a certificate of incorporation.
In many cases, the individuals that own the business will be the ones to incorporate the company by filing the necessary paperwork with Companies House themselves (or through an agent). Alternatively, it is possible to purchase a pre-existing company and repurpose it to fit your business’ needs.
These “ready-made” companies are commonly called “shelf companies” because company registration agents will file all the necessary paperwork in advance to create generic companies. The agents then put them on the proverbial shelf, where the companies do not trade until the registration agents sell one of them to business owners that want to trade through a private company.
At the point of sale, certain formalities are executed, therefore transferring the legal rights of the company to the buyer.
Shelf Companies vs Tailor-Made Companies
Shelf companies will already exist before the business that will trade through it has rights in the company. This means that the company will not automatically suit your business needs. In most cases, the company’s new owners will need to take several steps to repurpose the company. For example, you might need to change its name or amend the articles of association.
For tailor-made companies, you can specify all the particulars before submitting the necessary documents to Companies House. Accordingly, your company is suited to your business’ needs as soon as you receive the certificate of incorporation.
The advantage to buying a shelf company is that you can begin trading through it as soon as the sale is complete. However, when creating a tailor-made company, you will have to wait for Companies House to review your documents and issue a certificate of incorporation before you can start trading. Depending on how you wish to structure your company, this can take up to a few days. Although for most registrations, the process takes approximately 24 hours.
Additionally, company registration agents may have incorporated companies under popular names, so you may have to purchase the company from them if you want to trade under a certain name.
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Buying a Shelf Company
Typically, if you buy a shelf company, you will have acquired it from a company registration agent. The going rate is between £100 to £350, depending on the agent and their services.
The standard service will usually provide you with:
A certificate of the company’s incorporation from Companies House | This is proof that the company is registered with Companies House and provides the date of registration, along with the name and address listed at the point of registration. |
| The company’s memorandum and articles of association | These set out the rules currently governing the company. In practice, most registration agents use the “model articles”, which are a generic set of articles set out under certain laws. Notably, you may want to change them in the future to better suit your company. |
| A certificate of non-trading | This certificate evidences the fact that the company has not been active before you become the new owner. This is important because you want to ensure the company does not have any outstanding liabilities to anyone else. If the company has not been trading, it will not have any liabilities. |
| Documents evidencing the sale of the company to you | These should be stock transfer forms that the agent signs. Such documents are proof that you have acquired the shares in the company. |
Typically, you would also receive the minutes of any board meetings that were held before you bought the company and the company seal (if it has one).
Formalities After Purchasing a Shelf Company
There are some formalities you will have to complete immediately after the sale. For example, you must alert Companies House to the fact that the directors’ details have changed. Many company registration agents will do this for you as part of their service.
Below are the key steps that either you or the agent will need to take after you purchase a shelf company:
- convening a board meeting announcing the sale of the company and approving any associated costs of the purchase;
- changing the company name (if appropriate), which will require you to submit a special resolution to the shareholders;
- amending the existing articles or adapting new ones — if you intend to issue different classes of shares, for instance, this may be necessary;
- changing the address of the company’s registered office;
- changing the company’s accounting date if you wish; and
- appointing any additional directors to the company.
More generally, you will also want to consider other items that all newly-formed companies tend to evaluate, including:
- approving any service contracts;
- appoint a chair of the board of directors;
- issuing new shares; and
- entering into any contracts.
Key Takeaways
If you want to trade through the private company structure, you will need to acquire ownership of a company first. You can either create a brand new company or acquire a ready-made company and then adapt it to the specific needs of your business. These ready-made companies are commonly called “shelf companies”.
If you need help incorporating your business into a company, our experienced corporate lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today at 0808 196 8584 or visit our membership page.
Frequently Asked Questions
A shelf company is a company already in existence but not yet trading. You can purchase these entities from a company registration owner and use it to trade your business through it.
Compared to tailor-made companies, you can start trading as soon as you acquire the shares in the shelf company. However, for tailor-made companies, you will have to wait for Companies House to issue you with a certificate of incorporation before you can start trading.
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