Have you ever heard about shelf companies? Do you know if such entities exist in Romania or not? Find out more from our lawyers, below!

A shelf company is a type of entity that you incorporate and later set aside, much like placing it on a shelf “to rest“. Unlike a regular corporation, that you establish and then immediately start operating by issuing invoices and delivering products or services to clients, a shelf company is not active after its formation. Instead, it is set up and usually set aside for someone else to take over in the future.

Shelf companies are usually created by corporate lawyers. They set up these companies, and when a client needs a company quickly, they can offer one from their “shelf”. It is not gifted, of course. A fees is involved and the company’s shares are assigned to the person who wants to own that company in the future (also known as an “assignment of shares”).

What are the benefits of a shelf company?

• Time and Money

  The first advantage of a shelf company is time and money. In many jurisdictions, it can take a considerable amount of time to open a company—sometimes weeks or even months, depending on the country.

By acquiring a pre-existing company from the shelf, the process can be completed quickly and efficiently. In some jurisdictions, the fee for taking a shelf company might be lower than incorporating one from scratch. However, this isn’t typically the case in Romania, as we will explain below.

• Company History

  Another advantage of purchasing a shelf company is that it already has a history. Unlike a newly established company, a shelf company may have been registered for months or even years.

This can be beneficial if you want to apply for a bank loan, participate in public tenders, or demonstrate to clients that your business has been around for some time. However, while some people like to use this to their advantage, it is not something we encourage in order to create an artificial image of your corporation.

• Less Bureaucracy

  Lastly, in certain jurisdictions, acquiring a shelf company can mean dealing with less paperwork and fewer formalities than starting a company from scratch.

Lawyers typically handle the paperwork, making it easier for you as an entrepreneur. Rather than signing countless documents and emailing back and forth, you may only need to sign a few papers, making this a more convenient option.

What can you use a shelf company for?

You can use a shelf company for almost any legal business activity permitted in the jurisdiction where the company is registered. This can range from selling products online to offering in-person services. However, once you take the company off the shelf, you should check the specific requirements for your business.

Why is this important? A shelf company usually lacks specific authorizations. For example, if you’re a dentist looking to use a shelf company for your dental practice, you’ll need to obtain all necessary authorizations from regulatory bodies to operate legally. The same applies to businesses in hospitality, such as restaurants or hotels.

In other words, acquiring a shelf company doesn’t eliminate all the bureaucracy required to operate your business legally.

Shelf Companies in Romania

There are no actual shelf companies in Romania.

Romanian law is different from legislation in other countries, such as the UK or the US, where proper shelf companies exist. In Romania, there isn’t a concept of an actual “shelf” where you can store a company. The closest equivalent is opening a company in your name, suspending its activities, and later transferring it. This suspension (suspendare) is like pausing your business. During this time, you still need to comply with your legal obligations, such as filing tax returns for your corporations.

The main concept of a shelf company is similar with opening a company in Romania and pausing it. But there are still significant differences. For instance, in Romania, you cannot guarantee that a company hasn’t engaged in any previous activity or even received fines from tax authorities. You just have rely on the good faith of the person selling you the business.

Therefore, we don’t recommend clients to rely on this kind of corporation when starting a business in Romania (despite many websites advertising these services).

In short, according to Romanian legislation, there is no such thing as a proper shelf company. Instead, we have the options of shares assignment from an older company, that was suspended.

What should you do when buying an older company, not a shelf one?

You need to conduct a due diligence process, which can be more time-consuming and expensive than setting up a Romanian company from scratch. This leads us to the most important point about Romanian companies: they have a relatively fast and straightforward incorporation process.

In Romania, setting up a company—usually a limited liability company (LLC) or “Societate cu Răspundere Limitată” (SRL)—is quick. You don’t need months or weeks to establish a company. When you come across an SRL online, it’s simply a Romanian LLC, which can be registered in just a few days once the necessary documents are submitted by the client.

We advise our clients that incorporating a new company in Romania typically takes around two weeks from when they start the process. This timeframe includes drafting papers, sending them to the client for review and signature, and setting everything up with the Romanian Trade Registry. Unlike buying an older company, establishing a new company in Romania doesn’t require a due diligence process, making it a safer and more efficient option.