In India, a shelf company is defined as a legal entity that has already been incorporated under the Commercial Law. The shelf company, also referred to as a ready-made company, does not perform commercial activities, but it is available for sale and, if purchased, the investors will be able to start their business activities much faster than in the case of the standard registration procedure.
Purchasing a shelf company can be an attractive way of starting a company in India, as the time frame in which the businessman can start his or her commercial operations is much lower compared to the regular registration since the legal entity has already been registered with the local institutions.
As a general rule, a company can be incorporated in India in a period of a minimum of 16 weeks, while in the case of a shelf company, the purchase procedures can be completed in 10 days. Our team of specialists in company formation in India can offer assistance with the main procedures that have to be completed when buying a ready-made company.
What are the main types of shelf companies in India?
Foreign businessmen who want to open a company in India have two main options related to ready-made companies. The first one is to purchase a new shelf company, which designates a legal entity that has been incorporated in India but has never conducted business activities.
The other option would be to purchase an old shelf company. This type of ready-made company is different from the first one in the sense that its founders have conducted business activities. If the investors opt for the second option, it is necessary to conduct corporate due diligence procedures, through which the buyers will verify if the legal entity has any hidden flaws and, in this sense, it is advisable to receive legal assistance from our team of agents in company registration in India.
Detailed guide to buying a shelf company in India
Purchasing a shelf company (also known as a ready-made company or aged company) in India can be a quicker way to establish a business presence compared to registering a new company from scratch. Here are the general steps to buy a shelf company in India:
- Determine your requirements: Before buying a shelf company in India, clearly define your business objectives and the type of company you need. Ensure that the shelf company’s name and business activities align with your goals. Furthermore, if you are seeking assistance to register a company in India, get help from our company formation agents.
- Identify reputable sellers: Research and identify reputable and trustworthy companies or agencies that specialize in selling shelf companies in India. For instance, you can consult with our company formation agents in India if you are interested in buying a shelf company.
- Choose a shelf company: Review the available shelf companies’ details, such as their names, registration dates, and authorized capital. Select a company that matches your requirements. Or get in touch with our company incorporation specialists in India. They can assist you in making a final choice.
- Due diligence: Our company formation agents can conduct thorough due diligence on the selected shelf company. This may include verifying its financial history, legal compliance, and any existing liabilities or pending legal issues. They will ensure that the company has a clean record.
- Negotiate terms and prices: Our agents can negotiate the terms and prices of the shelf company in India. They will also be aware of any potential additional costs, such as transfer fees or taxes, and also guide you about it.
- Purchase agreement: Once you agree on the terms, both parties should draft and sign a purchase agreement. This agreement should outline the terms and conditions of the sale, the purchase price, and any warranties or representations.
- Payment: Transfer the agreed-upon purchase price with the help of our agents as per the terms of the purchase agreement.
- Transfer ownership: After the payment is made, our agents will ensure the transfer of ownership of the shelf company to your name. This typically involves updating the company’s details with the Registrar of Companies (RoC).
- Update company details: Our company formation agents can offer you help with statutory and legal details of the company, such as its registered office address, directors, and shareholders, are updated to reflect the new ownership.
- Obtain necessary approvals: Depending on the type of business and industry, you may need to obtain specific licenses, permits, and approvals. Make sure all regulatory requirements are met. Or our company incorporation consultants can guide you on which permits you need to regulate your business in India.
- Tax and compliance obligations: Comply with all tax and regulatory obligations, including obtaining a Permanent Account Number (PAN) and Goods and Services Tax (GST) registration if applicable. Consult with our agents to learn if PAN and GST registrations apply to your business.
- Bank account: Open a business bank account for the company to manage its financial transactions with the help of our agents.
- Customization (optional): Make any necessary changes to the company’s structure, business activities, or branding to align with your specific business goals.
- Commence business operations: With all legal and administrative requirements met, you can start your business operations using the purchased shelf company in India. In addition to this, if you need any help regarding your company’s accounting, do not hesitate to get in touch with our accountants in India.
It’s crucial to consult with legal and financial professionals who are well-versed in Indian corporate law to ensure that the purchase is legally sound and to handle the necessary registrations and compliance. The process can vary based on the specific circumstances and location of the shelf company in India. So, you are welcome to get help from our seasoned company formation specialists. Besides the shelf company, if you are interested in any other company structure, please consult with us. Our agents can offer you comprehensive information on how to form a company in India.
Other procedures related to starting a shelf company in India
Businessmen interested in how to form a company in India through a ready-made company will still have to conclude several legal requirements. For example, one of the crucial aspects will be to sign a document that will state the change of ownership from the previous owner to the new purchaser (by signing the share transfer agreement).
An important matter that has to be resolved is to obtain a Director Identification Number for the directors appointed by the new owners of the company. Following the applicable legislation, the appointed directors will have to obtain a Digital Signature and our team of consultants in company registration in India can provide further information regarding this matter.
As mentioned above, the shelf company already has a designated corporate bank account but, in the situation in which the investors will want to change the company’s name (a procedure to which they are entitled), this change must also be reflected in the details of the bank account. This modification has to be registered with the Registrar of Companies in India as well. Once the company starts trading, it will become liable for taxation. Depending on the annual turnover and the business field in which it operates, it can also become liable for the payment of the VAT.
As a general rule, the investors should be present in the country during the purchase procedure, but certain steps can be easily completed by our team of specialists in company formation in India, provided that the investors have offered all the necessary documents and have signed a power of attorney.
Why start a business activity through an Indian shelf company?
One of the most compelling arguments for those interested in opening an Indian business through a shelf company is defined by the fact that the time spent with the procedure of company formation in India is no longer required. Besides this basic advantage, the shelf company can also be advantageous due to the following:
- It represents the fastest way for an investor to enter various agreements;
- The company already benefits from a corporate bank account and registration with the tax authorities;
- It provides the advantage of offering a solid corporate image, given the longevity of the business;
- It implies a lower level of bureaucracy and the company’s representatives can hire employees faster.
What are the advantages of a shelf company in India?
One of the main advantages of a ready-made company in India is that the legal entity has all the incorporation documents. When purchasing the ready-made company, the investors will receive the Certificate of Incorporation, the company’s seal, and other relevant documents. The buying procedure differs depending on the type of shelf company preferred by the investors (old or new).
In the case of an old shelf company, it is necessary to appoint new directors to obtain the resignation documents of the previous directors and to sign the share transfer agreement and other specific documents. Investors interested in registering a company in India are invited to consult our team of consultants for further information on the shelf company.
Number of registered companies in India
If you are starting a company in India, please have a look below at the registered and active companies in India:
- In June 2022, India had a registered count of more than 1.48 million companies;
- Almost 1.47 million out of 1.48 million fall into the category of companies limited by shares.
If you plan to open a company in India, it is recommended to contact us for assistance.
Also, note that India has complex labor laws and regulations. Payroll processing ensures that a company adheres to these laws, including deductions for provident fund, professional tax, and income tax, and the timely deposit of these amounts to the government. If you want to comply with the regulations of payroll in India, please consult with our company incorporation agents.