Setting up a company can be a complex task since it carries lots of requirements and regulations, especially as a foreign investor. Therefore, the easiest and simplest option may be to acquire a company that is already registered. This way, ex-pats can start their business activities sooner than later. That is why; shelf company formation in Saudi Arabia represents a great option for investors.
In this article, you will learn everything you need to know about shelf companies in Saudi Arabia. Indeed, you can find shelf companies in most countries around the world, which is why they can also be easily acquired in Saudi Arabia. Let us see:
- What is a shelf company?
- What are some of the benefits of a shelf company in Saudi Arabia?
- Costs associated with the acquisition of a shelf company
- Why should you buy a shelf company in Saudi Arabia?
- What are the main characteristics of a shelf company in Saudi Arabia?
- How can we help you get more information about buying a shelf company in Saudi Arabia?
1. What is a shelf company?
It is a company that is already done and registered but without any use or any activity. Indeed, people sell these companies and others buy them without having to go through the entire incorporation process. Therefore, the shelf company activates the moment someone acquires it.
This type of company can register like any other in any country. Generally, those who sell them have a list of companies in different places already ready for customers. Hence, if you want to buy a shelf company in Saudi Arabia, it is possible; you just have to ask for it. Additionally, you should also take into account that a shelf company is like any other company, which is why it can also have directors or nominee members.
As for their names, these are already indicated and the name was chosen by the person who registered it. However, the people who sell them usually have a list with different options for the buyer. This way, the company can have a name that is closest to the line of business or its purpose.
1.1 Different terms used in a shelf company
- Reserve society.
- Pre-constituted company.
- Sleeper society.
- Aged shelf company.
- Readymade company.
- Old company.
2. What are some of the benefits of a shelf company in Saudi Arabia?
Anyone can buy a shelf company. Nevertheless, it is advisable to buy a shelf company for all those who are looking for any of the following points:
2.1 Time-saving
There are people who need a company from one day to the next. Otherwise, if they did not have a company right away they would lose a lot of money. With a shelf company, all you have to do is contact a lawyer.
Consequently, the company or agent that sells this type of company and possibly in 24 or 48 hours you will already have your company. However, the time will depend on many factors. Even so, it will definitely be less compared to the time it takes to create a new company. In fact, there are companies that usually take a few days.
2.2 Need to close business in a short time
With a shelf company, you will be able to close deals in 48 hours because you will not have to wait a week or two for your company to be registered. Therefore, you will not miss business opportunities that you can rarely obtain.
2.3 Offshore companies
Offshore companies provide high privacy so you can enjoy this benefit since third parties will not know that your company was inactive for years.
2.4 Licensing
If you require a license, depending on the case, you will probably also need your company to be a few years old.
2.5 Things you need to know
Before deciding whether or not to buy a shelf company you should keep in mind that it will not always be cheaper. Therefore, each company must pay annuities, especially when these are inactive for a certain number of years. Additionally, they must pay past annuities and the person, who acquires the already registered company, must pay for it. Depending on the case, they must pay the corresponding fines.
3. Costs associated with the acquisition of a shelf company
Before deciding whether to buy a shelf company or not, you should take into account that they have several associated costs. Consequently, this type of company must pay certain annual fees for the correct management of their secretariat and the fulfillment of associated obligations such as:
- Fiscal: with the payment of taxes.
- Mercantile: with the keeping and legalization of the official books and agreements of the board and councils, where appropriate.
- Accountants: with the presentation and deposit of the annual accounts, among others.
- Labor: with the payment of payroll and the declaration of social security affiliates, etc.
4. Why should you buy a shelf company in Saudi Arabia?
There are many common reasons for buying a shelf corporation, such as:
- Business people can save much time involved in taking the steps to create a new corporation.
- You can bid on contracts since some jurisdictions require that a company be in business for a certain length of time to have this ability.
- It enables showing corporate longevity in order to attract consumers or investors.
- Grant the opportunity to gain access to corporate credit.
However, these reasons are open to criticism, although, many years ago, it would have taken months to incorporate a business properly. Thanks to shelf companies. Nowadays, it is easier to do so in many countries, especially, Saudi Arabia. In fact, in some jurisdictions, it can be done in a couple of hours.
It is crucial to stand out that the re-aging of the shelf corporation. In case the credit bureaus find out about the company being under new management, they will list it on their reports, effectively re-aging the company.
4.1 Bank account
To open a bank account, normally, you have to provide the bank with your business activities and future plans, and proof of your current business activities. You can do this through company brochures, a company website, and business contracts; a lease agreement will help support your bank account application.
5. What are the main characteristics of a shelf company in Saudi Arabia?
A new company formation in Saudi Arabia differentiates from a shelf company because the second one is already registered and anyone can buy it as such. Below, we will see what comes with a shelf company:
5.1 Trading name
It is an essential element for doing business in Saudi Arabia. Indeed, it is the sign or denomination that identifies a company in commercial traffic. Likewise, it serves to distinguish it from other companies that carry out identical or similar activities.
Therefore, it distinguishes the company that manufactures or markets the products or provides the services. On the other hand, the brand distinguishes the products or services that the company manufactures and provides.
Thus, a trouser manufacturer would register as a trading name the one it uses in its business activities as a manufacturer, for example, in its relationships with suppliers, customers, etc. Consequently, the sign or name with which these pants are marketed will be the brand of the product. In fact, trade names do not necessarily have to consist only of words; they can include graphics or drawings.
To sum up, trade names are distinctive signs of great importance for companies, as they identify entrepreneurs differentiating them from their competition. In addition, they serve to attract customers, concentrate the reputation of the company and fulfill an advertising function.
5.2 Registered address
A registration address is the permanent address of an entity, which generally has to do with the permanent location of the company. Unlike a postal address, the address of record refers to a specific location where the company physically resides. This designation of a permanent location is often required as part of legal documentation for a wide range of activities.
It includes obtaining a loan of some kind, obtaining a credit card, or even filing a tax return in many nations. In addition, the address will include a specific street address, including a suite or apartment number if that location is the site of a building containing multiple units.
Many types of organizations require submission of a registration address, even when the contacts will be handled using a postal or mailing address. For instance, a bank will require that the paperwork associated with a car loan application include a mailing address and physical address as essential details.
Likewise, financial institutions that extend lines of credit to businesses will require both a mailing address and an address of record as part of the account details kept on file. While there are reasons, why different lenders and other organizations require the declaration of an address of record, one has to do with keeping the incidence of fraud under control. Hence, it provides a verifiable physical address where the account holder can be found.
5.3 Constitutive documents
They are mandatory documents determined to establish legally the formation of an organization or business company. Therefore, it has parameters considered fundamental for its elaboration, where they stipulate all the general aspects of the company.
The importance of these documents lies in their legal weight. In fact, they are a support for all those involved in the creation, administration, and development of the company. As a result, it establishes all the legal bases so that both the contributions, profits, or losses of the company are carried out correctly.
It is crucial to stand out that there are several requirements to acquire these documents:
- The name, address, and nationality of each of the members that constitute the company.
- Company object.
- Duration of the company.
- Distribution of contributions in capital or kind made by each member.
- Functions to be performed by each member within the company.
- The business social reason.
- Registered office.
- Form of administration of the company and functions or powers of each of the administrators.
- Bases and conditions to liquidate the company.
Since it is a notarized document, after carrying out these processes, the person must bring it before the notary to formalize the act. In the case of a commercial organization, there are certain aspects such as:
- The clear and complete name of the company.
- Company goals.
- The nationality, address, and full name of the partners.
- Time stipulated that the partnership lasts.
- The exact budget that was invested for its formation.
- Aspects to take into account to liquidate the company in case of bankruptcy, failure, or simply dissolution.
As you can see by buying a shelf company, you can save a lot of time since you do not have to go through all of the mentioned steps which can be quite tedious.
6. How can we help you get more information about buying a shelf company in Saudi Arabia?
The process of buying a shelf company can be quite complex. Nevertheless, do not worry, at Company Formation Saudi, we will help along the process. We have 20 years of experience in the market, helping many businesses thrive in Saudi Arabia’s market and achieve their long-term goals.
We want to help you implement your ideas into automation and make it into reality. In addition, we offer a large variety of services, such as:
- Visa.
- Legal services.
- Virtual office service.
- Payroll service.
- Branch service.
- Accountant service.
- Immigration process.
Would you like to contact Company Formation Saudi to obtain more information about acquiring a shelf company in Saudi Arabia? You can call us at our phone number if you need help +971 43 316 688 If you would rather use e-mail, you can contact us at contact@companyformationsaudi.com.