Market for shelf companies losing its shine

The market for ready-made shelf companies is losing its lustre as competition heats up with the Companies Commission of Malaysia (CCM) offering better values for new set-ups.

Some secretarial firms have slashed prices of these ready-made companies by half.

"Everyone wants to sell shelf companies as they can make 50 per cent margin. CCM is a threat as they offer low fees," the owner of one firm said.

More than three years ago, a shelf company with an authorised capital of RM100,000 was selling for between RM2,500 and RM3,500.

Now, it can be bought for between RM1,400 and RM1,600. Some are still selling at RM2,000 to RM2,500, depending on how good the name sounds.

At the CCM, the fee to set up a new company with an authorised capital of RM100,000 is RM1,000 and up to RM5,000 for one with an authorised capital of between RM500,000 and RM1 million. CCM has maintained its prices for years.

CCM chief executive officer Datuk Azmi Ariffin told Business Times that the need for shelf companies is reducing in size with the shorter period to set up a new company.

A new company can be set up with CCM in a day now versus seven to 10 days prior to 2005. It takes two to five days to buy a shelf company.

"A shelf company is incorporated with the anticipation to be sold to potential investors who wish to start a company expeditiously.

"It was created and left with no activity - metaphorically put on the 'shelf' to 'age'. With improvement in CCM's clients' charter, the need for shelf companies is diminishing," Azmi said.

Based on the 2009 data, CCM said there are 42,049 RM2 companies in Malaysia worth some RM84,098.00. Between 2005 and 2010, an average 41,139 firms were set up a year with slight growth.

SCS Management Services sole proprietor Tee Eng Yong said the market for shelf companies had dropped by 60-70 per cent in the last four years.

"Fewer people are buying shelf companies although it has more advantages than a new firm," Tee said.

Shelf companies are usually set up three years prior to sale. This means it will have a long operating history, enhancing its corporate image.

The companies are registered under general trading, meaning buyers can operate any type of business, but with approvals, licences and permits for some.

"People buy shelf companies because of privacy issues on certain contracts, conflict of interest or to handle urgent matters such as getting loans.

"We have tycoons coming to us to buy shelf companies. But the situation was better four years ago," Tee said.

Source : Busniess Times