A shell company is a company which has no assets and is used as a vehicle to hold and shift money in financial manoeuvres. Sometimes, this also refers to a dormant company which may be left for future use or that simply contains the skeleton of a previous business.
A cash shell company is similar but with cash in the bank. They are corporate vehicles floating on the stock exchange which have no operating business but can be filled with assets. Cash shells are often — but not always — used as investment vehicles. This means that the directors and shareholders of the shell may be looking for a business to fund.
Cash shells are attractive to other companies looking for an easy listing on a stock exchange. Indeed, companies with an operating business can bypass the time-consuming and costly process of listing on the stock exchange and simply buy the shell company — this process is known as a reverse takeover.
Buying into cash shell companies is what made Andrew Regan so successful on AIM.
Sirius Petroleum is a good example of this. By buying into the cash shell of a former gaming business, Regan’s investment vehicle Corvus Capital was then able to restructure the company to give it a new strategy as an oil and gas investment company, with the aim to turn it into a viable, standalone business.
However, the National Crime Agency has also warned the use of shell companies “represent a significant risk in high end money laundering” and are used “extensively to provide anonymity to criminals”.
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