[1] Anonymity may be sought to shield personal assets from others, such as a spouse when a marriage is breaking down, from creditors, or from government authorities.
Shell companies' legitimate business purposes are, for example, acting as trustee for a trust, and not engaging in any other activity on their own account.
A special purpose entity, used often in the context of a larger corporate structure, may be formed to achieve a specific goal, such as to create anonymity.
When Hilco purchased HMV Canada, they used a shell company by the name of Huk 10 Ltd.[8] in order to secure funds and minimize liability.
In addition, there are several shell companies that are used by broadcasting groups to circumvent FCC limits on television station ownership.
There are also shell companies that were created for the purpose of owning assets (including tangibles, such as a real estate for property development, and intangibles, such as royalties or copyrights) and receiving income.
[18] In 2013 the International Consortium of Investigative Journalists published a report called "Offshore Leaks" with information about the use and owners of 130,000 shell companies.
Many of the shell companies belonged to politicians and celebrities from around the world and were being used for tax evasion and hiding financial assets.
[19] In 2016 a leak of 11.5 million documents to the German newspaper Süddeutsche Zeitung revealed information about owners of more than 214,000 shell companies administered by the law firm Mossack Fonseca in Panama.
The shell companies were used by politicians, businessmen, autocrats, and terrorists from around the world for tax evasion and other illegal activities.
[10] After India's decision to demonetise ₹500 and ₹1000 rupee notes on 8 November 2016,[20][21][22] various authorities noticed a surge in shell companies depositing cash in banks, possibly in an attempt to hide the real owner of the wealth.
Currently British overseas territories and crown dependencies are only required to tell the true name of owners of shell companies upon request from official law enforcement agencies.
[25] In January 2021, anonymous shell companies were effectively banned via a provision in the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021.
[27] On 22 December 2021, the European Commission adopted a proposal for an EU Directive to tackle the misuse of shell companies for tax purposes.
[28] Also known as the "Unshell" directive, the proposal requires the unanimous agreement of all 27 EU Member States' finance ministers before entering into force.