Shelf company

What it means

A shelf company, sometimes called a ready-made company, is a company that a provider forms and enters in the commercial register in advance, without it carrying on any business. The buyer acquires it by transfer of the ownership interest and a change of director, so it can start trading within a few days.

The main advantage is time. The company already has an IČO, a DIČ, registered share capital and often a bank account, so the buyer does not have to wait for the whole incorporation. This helps, for example, in public procurement with tight deadlines or when a partner insists on contracting with an existing company.

After the purchase, the new shareholder and director must be entered in the commercial register, and the name, registered office and business activities changed if needed. The buyer also updates the details of the beneficial owner. The cost of these changes should be added to the price when comparing with a new incorporation.

How it works in practice

Before buying, even a company that supposedly never traded deserves basic due diligence: an extract from the commercial register, the debtor lists of the tax office, Social Insurance Agency and health insurers, the collection of deeds, and confirmation that capital was paid and that there are no liabilities. A reputable seller gives a contractual warranty that the company has no debts.

The share transfer agreement must meet the requirements of the Commercial Code, and signatures are certified. The new director consents to registration, and the buyer needs the property owner's consent for the registered office. Once the changes are registered, the tax office and, where relevant, the bank and other institutions must be notified.

Setting up a new s. r. o. is now relatively fast, including online, so it is worth comparing. A shelf company makes most sense when every day counts or the company must be registered by a certain date. For an ordinary business plan, a new incorporation is usually cheaper and cleaner.

What to watch out for

The biggest risk is hidden history. The company may have filed tax returns, signed contracts or left fees unpaid, which the seller does not know about or keeps quiet about. The company remains liable for these even after the change of owner. A contractual warranty and holding back part of the price protect the buyer better than verbal assurances.

Be wary also of companies with a history sold as shelf companies. A company that was VAT-registered, had employees or filed reports is not clean, even if currently dormant. Some such companies have been used for fraud, and the buyer may inherit a problem with the tax administrator or a bank.