fre - chinese shell play ?, page-13

Great post. Quite laughable really how some people don't do their research and post in a manner as though they do.

Shell companies are generally attractive primarily due to the essentially "tax-free" status any future income to the extent that they are absorbed by these losses.

There are, however criteria that must be met before losses are carried forward, and they are:

http://www.ato.gov.au/corporate/content.asp?doc=/content/00262223.htm&page=10

Companies can generally carry forward a tax loss indefinitely, and utilise it when they choose, provided they have either substantially maintained the same ownership and control or carried on the same business since the loss was incurred.

When losses can be utilised
Although companies can generally utilise carried-forward losses in any future income year, losses must be utilised in the order in which they were incurred, and special rules apply in relation to net exempt income and franked dividend income.

Continuity of ownership, control, and same business tests
To utilise a tax loss a company must either:
satisfy both the continuity of ownership test (COT) and the control test, or satisfy the same business test (SBT).



Shell companies are kind of the "flavour of the month", and can be very rewarding investments. Essentially, you're "buying" the right to not pay $X amount of tax in the future, for $Y amount now. Obviously $X > $Y has to hold true, otherwise this would be pointless. You would also need to discount the value of $X to the value today, and factor in the risk of the investment.

Each to their own - this may or may not be for you.

Questions for those who have done research on this shell:

1. What sort of projects are being bandied around? Presumably resource acquisition?
2. What's the likely timeframe (looking at the history of this crew)?