Shelf company in Slovenia – downsides of buying an existing company

Even before the coronavirus outbreak we received questions from entrepreneurs who wanted to start a business in Europe through buying a shelf company. Now, due to the outbreak, closed borders and other uncertainties, even more people are considering buying an existing business instead of opening a new one. We will be highlighting the negative issues which you can encounter when buying a shelf company in Slovenia that you might not be aware of.

Are you a business owner in Slovenia or looking to register a company here? Are you having trouble understanding what is best for your business expansion? We are organizing webinars to understand company registration and business immigration to Slovenia. Apply here or call our experts on +386 1 6006 270, Viber/Whatsapp +386 40 530 718 or write to us on  [email protected]

Data d.o.o. has been offering support to entrepreneurs with business in Slovenia  for 30 years. We provide company registration support as well as professional accounting services. Additionally, we also have a specialized legal department that supports business owners with every aspect of business Slovenian legislation. They can also assist you in implementing the measures that the state offers to entrepreneurs during coronavirus outbreak. We also follow the novelties that the state enforces to support the economy and can offer consultation. You can also follow us on Facebook.

Shelf company in Slovenia – regular downsides

Entrepreneurs often decide to buy a shelf company to avoid the travel to Slovenia for company registration. The other reason is that they buy a company to avoid having to open a bank account. But in both cases it is actually not advisable to buy a shelf company because the notary expenses of transferring ownership can amount to the same costs as they would for a trip to Slovenia. And during the epidemic, there are still possibilities to also register a new company remotely. When it comes to bank account, when the ownership changes the banks close the bank account almost immediately in most cases. You would then still have to go through the same procedures of bank account opening and can also expect a fine from the government if your company does not have at least one bank account registered with the Financial Administration of Slovenia.

Inheriting debt from the previous owner is also one important aspect to take into consideration. When buying a shelf company, you can check some publicly available information of the company. But you cannot check the details about debt which the company has to debtors. This information only becomes available once you are the owner. And when you are the owner, it will be your responsibility to cover that debt.

Shelf company in Slovenia – downsides relating to employment

Foreign entrepreneurs often think that buying a shelf company would enable them to skip the steps necessary for business immigration. But any company in Slovenia, old or new, has to fulfill the same conditions to be able to employ foreigners. Those are:

• investing 50.000€ into fixed assets of the company,
• or employing an EU citizen for 6 months on full-time salary,
• or showing 10.000€ monthly revenue for 6 consecutive months.

Shelf companies on sale usually do not fulfill any of those conditions. They are sold without investments, employees or such a high revenue. So, it will be again up to you to start fulfilling the conditions from scratch. And when buying a shelf company, it is also possible that the company you buy has received penalties relating to labor legislation and is hence not allowed to employ foreigners for a specific period of time. This information will also become available to you only when becoming the owner.

Downsides of buying existing companies during coronavirus outbreak

In addition to the regular issues you can encounter, there are also specifics during the time of coronavirus outbreak where buying a shelf company is not a good option. As companies can apply for governmental support to ease the effects of coronavirus, they will become recipient of salary compensation or credits by the government. This kind of support mandates that the company fulfills specific conditions. Those include: not paying dividends or bonuses in 2020 or showing decrease in income in 2020.

Should these conditions not be fulfilled by the time of financial report submission, the aid will have to be returned. So, if the previous owner applied and received support through the Intervention Act, the company will still have to follow these conditions even after ownership changes. Which would mean that the shelf company you bought would not be able to generate a higher income. It also cannot pay bonuses to management and staff in 2020. There is also a higher chance that buying an existing company in this time would result in inheriting debt from the previous owner.

Because of all these reasons we suggestto register a new company in Slovenia. If you have an existing business abroad, you can also register a branch office. These are the only options to be sure that your company has a »clean slate«.

Are you a business owner in Slovenia or looking to register a company here? Are you having trouble understanding what is best for your business expansion? We are organizing webinars to understand company registration and business immigration to Slovenia. Apply here or call our experts on +386 1 6006 270, Viber/Whatsapp +386 40 530 718 or write to us on  [email protected]