In today’s world, the shelf corporation have an important place in business. There have been reports of fraudulent activities in this sector. However, no sector in the world is free from fraud. The human mind is a fickle entity. It has the capacity of thinking one thing and doing exactly the opposite. When such minds abound, there will be frauds. However, that does not mean we should start painting the entire industry with the same brush. We shall now see some instances where frauds have taken place involving the aged corporations.
People committing frauds do tend to sell off shelf corporation for funding activities by stating that they come with an established credit line. However, that is not the case. Banks are not that naive to dole out huge quantities of cash without verifying the identity of the borrowers. The banks do a thorough check of the new owners before sanctioning their loans. This is required for banks deal with public money.
There have been instances where some unscrupulous persons have cheated many people stating that a personal guarantee is available for the loans they avail. The guarantor does not know the new owners and this it would be silly to assume that he would be extending his guarantee to unknown people.
We have seen two instances of frauds taking place above. However, not all the shelf corporations are bad. People should be cautious while dealing with anything suspicious. If you obtain proper documentation and exercise proper diligence, there could be no fraud in these cases.
Dealing with the right kind of people will eliminate frauds. You should exercise proper caution by following all the procedures and ensuring proper documentation. People should understand that nothing comes cheap in the world. One has to earn their bread as well as respect.
You should understand that the shelf corporation are companies with no history of transacting business. Hence, these aged corporations should not have any assets or liabilities. In case they display any of these in the balance sheets, it should be a cause for alarm.
Secondly, as they have not done any business, there is no question of paying any tax as such. Thus, if you find tax returns in a shelf corporation proposal, you have to be extremely cautious. Violation of such conditions could result in a jail term too.
Buyers should do a thorough search of the company records as well as that of its directors in the Registrar office. In the case of a fraudulent company, you would find some clue or the other that could make you suspicious. Doing this search can also help you conclude that the company is a clean one. It is in your best interests that you conduct this search.
The shelf corporation is an excellent concept. Many people have benefited by this concept. However, you could find stray incidents too. That should not deter a genuine investor from coming forward and availing these benefits.