As a foreign investor, to establish a business entity, there are two possibilities to do so. The first is by incorporating a new business or purchasing or acquiring a shelf company.
A shelf company is a legal entity that is already incorporated and has no business activities or transactions. It can be of any legal form or type such as:
- Limited liability companies
- Partnership
- Joint stock companies
When you buy this type of entity, you should expect that it is already incorporated but dormant with a trading name, legal address, article of association, director, tax identification number, and in some cases a corporate bank account number and VAT.
The investor can choose the type of entity he or she wants if it is a private limited liability or public limited liability.
The name of the business must be unique from incorporation with the inclusion of the legal entity type. If the new owner wishes to effect any change, they must file to change it at the German trade register.
The date of incorporation is registered with the German trade register, together with the share capital and value of the shares.
Advantages of purchasing a shelf entity
Purchasing a shelf company offers benefits to foreign investors, and the advantage includes
Faster
The new owner of the business after the acquisition can engage in business activities more easily and faster than when starting a new entity.
Credible
The credibility of the entity is acknowledged, as there is no bad reputation or debt since it has not engaged in any business transaction or activities.
Customization
The entity can be customized during the formation to the client’s need, even after the investor acquires the company, he or she can acquire the company.
Time-saving
The transfer process is faster and more time-saving than the incorporation procedure, all that is required is for the investor to file the necessary documentation to the commercial registry.
Things to consider when purchasing a shelf company
The requirement of exhaustive verification of the company ought to be brought to the investor’s attention. This is done to ensure that the assertions made by the seller of the firm, namely, that the corporation has not been involved in any kind of business transaction or trade, are accurate.
A legal entity previously used can incur debts and the new founder will have to pay such debt if they are unaware. To avoid such an unfortunate scenario, a recommended team specializing in business registration in Germany should be hired for this sake.
Purchasing a shelf company
Acquiring a shelf entity in Germany is simple and hassle-free. The requirement includes the transfer of the company’s shares to the new owner. This transfer is completed before a public notary in Germany.
The cost of purchasing an entity will encompass the actual purchase of a business company, in addition to the fees charged by the notary public and the costs associated with making amendments to the Trade Register. Even though the owner can make some alterations to it or choose to do nothing at all, depending on their preferences and activities.
During the negotiation to purchase the entity, the notary must authenticate all documents and the buyer/investor must provide their identification documents. After the transfer of the company is completed, the new owner is expected to modify the company in a way that suits their interest, and the changes can be done to the following:
- The company’s name
- Business activities of the company
- Registered address
- Appointment of the new board of directors or management
Note that all modifications effected, should be filed at the German Trade register office and you have to prepare and submit the necessary documentation.
