A shelf company or a rack firm is a firm but it has never led any trade. In addition, it does not have any debt or funds. To clarify, these firms sit on a shelf after the listing and wait for people to buy them. This is to say that buying rack firms are the fast choice for people to start a new firm. It is because these firms save you from the long deal of listing a firm. However, the listing method of firms is now a lot faster and easier. Still, some people are keen on buying shelf firms. Buying a shelf firm has its own pros and cons. So, in this article, we will show the disadvantages of buying a shelf company. Let’s list them one by one.
1.Liabilities Pass with the Transfer of the Company
If your idea of buying a shelf firm is taking a loan then it will create a problem for you. Because, when you buy an old company, its current and future debts will also shift to you. And, to take a new loan, you will have to pay the past loans. Generally, the banks keep a close eye on the bank ranks and credit status of the firms before giving a new loan. But, the shelf firms do not have a log on trade, tax, and income. So, it will be a problem for you if you plan to buy a shelf firm. Since you are buying a shelf firm; its debts will also get shifted to you. And, it is one of the main harms of buying a shelf firm.
2. Need to go through the Process of Transferring the Shares of old Firm
As per the company’s act, the firms have reviews on a usual basis. And, the heirs need to change the part-owner every 5 years. Sometimes, this data is untold and the shares are sold. But, it may come into the light in the future and create issues.So, to avoid these issues, you will need to go into the process of selling the shares of the old firm. And, if the custom and revenue officers will come to know about any scam in tax and revenue from the old associates then the current sharers will have to take the blame and pay it fully. The old partners and team will not have to face any problems. Because the firm is now given to the new managers and now they are liable to pay. The new sharers will bear the results of tax and scams of buying a shelf firm.
3. Changing the Higher Authorities like Managers and Partners
Certainly, the control of the shelf firm will also need to be shifted. Firstly, you will need to replace the higher powers like the chief and associates with the new CEO and team. Secondly, you will need to swap old allies and sharers with new allies. Moreover, you will need to file a COR39 file with the CIPC to replace the leaders and allies of the shelf firm you are buying. And, as per the New Company’s Act, the CIPC do not store the data of sharers.You are advised to use a share-vault for a free online share record service to save the data of shares. Above all, it will assist you in the changes with management and the share shift after buying the shelf firm.
4. Changing the Company Name
Changing the company name is one of the main disadvantages of buying a shelf firm. It is because it will not let you opt for the chosen name. If you are looking to buy a shelf firm then you must know that you will not be able to have a name of your choice. Because, the firm is listed earlier and have its name so, you are not allowed to make any changes to that. he status of a shelf firm might have issues with annual returns to the CIPC. And, if you want to change to name as per your choice, then you have to file a COR15.2 with the CIPC to change the name.
5. Registering the New Address of the Company
It is also one of the biggest hustles of buying a shelf firm. Because you can’t run it on the old address for a number of reasons. And, if you want to change the listed address then you have to follow a proper process.You will need to file a COR21 appeal with the experts. The officers will check the details and pass on your offer to change the name.
6. Changing the Basic Rules of the Shelf Company to Start as a New
If you are planning to buy a new shelf firm, then you will have to change the basic rules of the old shelf firm to start as a new one. Because, every firm has to list its own rules to run it as per your choice, so you will need to change the rules. The old shelf firm must have its rules as per its trade goals, but you must have different business goals. And, to reach your goals, you will have to make some new rules that you can follow duly. So, changing the basic rules of the shelf company to start as a new is one of the main issues.
To Sum Up
So, this study makes clear the disadvantages of buying a shelf company. The shelf firms have their pros and cons and it is vital to study them both before buying them. And, to help you with the main things, we have this article for you. Above all, if you are planning to start a new firm, then the best way is to enlist a new company as a legal body. It will give a full control and save you from issues that a shelf firm might have caused. We hope that this report will help you with the choice of buying shelf firms. For more detailed studies on major topics, keep reading us. We are open to guide you with the keys you need.
