What can go wrong if you buy a cheap shelf company or company registration?

What can go wrong if you buy a cheap shelf company or company registration?

You are starting a new business. Presumably you are serious about this and want the company to succeed. You see that FNB will register a company for free, or, whilst most websites offer companies for around R2 000 (with varying free extras), some websites offer them at ridiculouosly low prices. Hey! You might save yourself R1 000! Really? Here are some of the things that can go wrong... and probably will if you buy a cheap shelf company.

Why you shouldn't even consider registering a cheap shelf company online:

  1. The company gets registered with no name and ends up being called K1029/123456/07 or something similar. Cost of changing that (using a reputable company such as Harbour and Associates), R1 200
  2. You don't get a share register or share certificate. Cost of getting them R1 015
  3. You don't get a tax clearance certificate. Cost R985
  4. You don't get a B-BBEE affidavit/certificate. Cost R875
  5. A bank account that you can't use, because you cannot be in control of it until you're the registered Director and then you'll have to go to the bank
  6. The company may already have liabilities. Cost potentially astronomical!
  7. Delivery promises that are unrealistically short (like immediate?) or unreasonably long (like change of shareholder 10 days, tax clearance certificate "additional time" where both of these should take no longer than 24 hours tops). 
  8. There's no back-up service, no response to your queries, late delivery.

Do these companies offering cheap company registrations really know what they are doing?

One of them offers CM29s for R175. Those are the register of directors that ceased to exist under the new Companies Act of 2008!! They were replaced by form CoR39. The same website offers 10 tax clearance certificates for R499. Tax Clearance Certificates ceased to be available in hard copy long ago and you can print as many copies as you like via e-filing. Also judging by the spelling errors on their home page, chances are they'll make typos when they prepare your CIPC documents. Oops!

Another website offers to assist you in obtaining a tax clearance certificate at the SARS office for R402,50. Really? Haven't they woken up to the fact that you can only get them via e-filing these days?

So what is the conclusion?

  1. Basically, after you've bought your cheap shelf company, you're on your own. No reminders when critical returns fall due, no free consultations with a business expert, no nothing!
  2. And don't just believe what they say about their professional qualifications - check up on the website of the professions that they claim to belong to. For example, there's one "audit company" that claims to be an IRBA approved B-BBEE auditor. The IRBA withdrew from B-BBEE auditing in August 2016!

The question you have to ask yourself is: What price will bring you peace of mind?

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South African Institute of Chartered Accountants. Designation CA(SA)  Internationally Accredited Financial MediatorsIndependent Regulatory Board for Auditors. Designation RA<Engineering Council of South Africa. Designation Pr(Eng) Member of MENSA, the High IQ Society




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