During consultations entrepreneurs almost always ask the same question: what is more advantageous, buying an investment company or registering a new one from scratch. And to answer honestly, without simplifications: the right choice does not depend on your “favorite jurisdiction”, but on your goal – speed to market, control, compliance, tax model, scalability and reputational horizon.
Since 2016 the COREDO team has supported dozens of projects in the EU, the United Kingdom, Singapore, Dubai, Cyprus, Estonia, the Czech Republic, Slovakia and other jurisdictions in Europe and Asia. I have seen how buying a ready licensed firm gave a client a strategic advantage of 6–12 months — and how the same deal completely “burned” the ROI due to hidden AML risks and underestimated integration.
In this article I will break the decision down: when it makes sense to buy a ready investment company (shelf / licensed company), when to register from scratch, which due diligence checks are critical and how to calculate ROI taking into account compliance and integration.
Buying a ready-made investment company: a strategic advantage
Buying a ready-made investment company is not just a way to save time on registration and approvals, but a tool that, when chosen correctly, becomes a real strategic advantage. Such an asset allows you to enter the market with an already streamlined infrastructure, licenses and track record, which directly affects the speed of scaling and competitiveness – below we will examine the key arguments in favor of such a purchase.
Key arguments in favor of buying
If your goal is the fastest possible market entry, buying an investment company with an existing license often becomes the shortest route. This is especially noticeable in regulated segments:
- MiFID II investment firms in the EU
- Management companies under AIFMD / UCITS
- VASP / crypto licenses (Estonia, Lithuania, some Asian jurisdictions)
- payment and EMI licenses (in the EU, the UK, Singapore, Dubai)
- forex / brokerage licenses
Typical advantages of acquiring a ready-made company:
- Speed to market
You get an already registered legal entity, often with an existing license, open banking and/or payment accounts and minimal operational infrastructure. For many COREDO clients the difference between ‘buy’ and ‘register from scratch’ amounted to 6–18 months of regulatory waiting.
- Access to existing infrastructure
In some deals the client was initially seeking not so much the license as:- established relationships with correspondent banks and payment providers,
- a functioning compliance framework (KYC, AML/CTF, transaction monitoring),
- ready agreements with custodians, clients, liquidity providers.
This is important when entering the EU, where opening corporate accounts and access to correspondent banking is accompanied by enhanced KYC and UBO checks.
- Ability to acquire the team and processes
With an asset deal + transfer of employees or a classic share deal retaining key personnel, you buy not only the legal shell, but also:- procedural regulations,
- an established AML/CTF framework,
- internal controls and corporate governance accepted by the regulator.
- Entry via a locally «respected» brand
For some clients, having a licensed legal entity with a reporting history in a certain jurisdiction (for example, Lithuania, Cyprus, the United Kingdom) made dialogue with institutional partners and banks easier.
Risks of buying a ready-made investment company
COREDO’s experience shows: speed is the main advantage and at the same time the main source of risk. The buyer focuses on the license and jurisdiction while underestimating:
- AML/KYC legacy and the quality of the client base
- How thoroughly KYC / enhanced Due Diligence (EDD) was conducted previously
- What AML risk scoring was applied
- How sanctions screening and PEP screening were conducted
- How many and what types of Suspicious Activity Reports (SAR) were filed
- Whether there is a backlog in transaction monitoring
We once supported the purchase of a licensed company in the EU where formally “there were no problems”, but during reputational due diligence + adverse media screening clients surfaced with signs of high-risk jurisdictions and a potential sanctions context. The deal was only “saved” through a significant discount and strict indemnity clauses for AML risks. - Hidden liabilities and contingent liabilities
- open tax audits and potential additional assessments
- undisclosed guarantees and side-agreements
- ongoing or potential litigation / lawsuits
- possible piercing of the corporate veil, if the regulator/court can extend liability to the beneficiaries
- Reputational risks of shelf / shell companies
- who the beneficial owner / UBO was
- what operations were carried out
- whether the company featured in negative news, data leaks, investigations
- how banks and regulators in the EU or Asia perceive it
- Transfer of licenses and permits (licensing transfer)
- requires a fit and proper test for new owners and directors
- triggers a re-examination of the license
- may lead to restriction of permitted activities
In the deal that the COREDO team conducted in one of the EU countries, the regulator explicitly stated: without formal re-authorization they will not recognize the change of ownership, meaning the key advantage in terms of speed was partially negated.
Registration of an investment company: control and substance
Registering an investment company from scratch is not just a choice of jurisdiction and form, but a tool to strengthen control over the structure, risks and regulatory requirements. Properly built substance and a well-thought-out long-term strategy from the outset allow you to embed competitive advantages that cannot be “finished” hastily later.
When registration from scratch is preferable
Company registration in the EU or Asia from scratch gives you what you can’t buy:
- Full control over the corporate structure:
- UBO structure, trusts, nominee schemes: everything is arranged according to your transparency and tax-residency strategy.
- Structure of governing bodies, board composition, independent directors.
- Clean reputational history:
No legacy clients, suspicious transactions, or inherited AML regulations. - Flexible adjustment of corporate governance and risk management to your business model:
- risk appetite policy
- enterprise risk framework
- stress testing / scenario analysis
- internal committee structure (risk, audit, compliance)
- The ability to establish substance requirements (economic presence) from the very beginning:
After the tightening of requirements in the EU, a formal company without a real office, staff and operational activity no longer works as a sustainable solution.
When registering from scratch we put in place:
- an office and minimal staff in the jurisdiction
- a real management function
- contracts with local providers
- a clear economic nexus
- Modern IT and AML infrastructure done right from the start:
Instead of “reworking” outdated CRM and AML systems of an acquired company, you build the architecture to fit your strategy:- KYC automation and RegTech solutions
- transaction monitoring based on risk scoring
- centralized case management
- integration with regulatory reporting systems (CRS, FATCA) and local reporting
Where registration is worse than purchase
- Timeframes
Company registration in some EU or Asian jurisdictions takes only days or weeks.
But obtaining licenses such as MiFID II, AIFMD, VASP, payment and forex licences can take months or even more than a year. For a startup or a fund with a flexible horizon this is acceptable; for a time-sensitive strategy (market entry before a new regulatory cycle or a competitor) it can sometimes be critical.
- Predictability of banking and payment relationships
A new structure without history always raises more questions from banks and payment institutions:- who is the UBO, where the capital comes from, what is the source of funds
- what is the business purpose of the structure
- whether there is real presence and substance
In such cases, the COREDO team usually models the bankability profile in advance: which banks or EMIs are more willing to open accounts for the chosen model.
Compliance and AML risks: what you must not postpone
Whether you are buying a company or registering one from scratch, the AML/CTF framework determines how resilient your business will be to scrutiny from regulators, banks and investors.
Key AML/CTF components in transactions
- KYC and enhanced due diligence (EDD)
- client identification procedure
- identification and verification of the Ultimate Beneficial Owner (UBO)
- client classification criteria: retail / professional / institutional
- additional procedures for PEPs and high-risk categories
- Sanctions screening and PEP screening
- regular screening against global sanctions lists (including SDN lists)
- automated adverse media screening tools
- Transaction monitoring and SAR
- development of risk-based rules and scenarios
- AML risk scoring algorithms for transactions and clients
- procedure for detecting, escalating and filing SARs with the regulator
- Procedures for cross-border investments
- country risk assessment
- controls against treaty shopping when using double taxation agreements
- consideration of substance/economic presence requirements in the source and destination jurisdictions of capital
Tax consequences of MiFID II and transfer pricing
When my team and I design a structure for a purchase or registration, I look not only at the tax rate. More important are the sustainability of the tax model and compatibility with EU rules, CRS/FATCA and local requirements.
Key tax elements
- Tax residency and substance requirements
Determines where the company is considered a tax resident and where its income is taxed.
When purchasing a company, it’s important to understand:
- whether its tax residency status is preserved
- whether dual residency will arise
- how changes in management (directors, place of decision-making) will affect the tax position
- Transfer pricing and intercompany agreements
In a group of companies with several legal entities in the EU, Asia and the Middle East, transfer pricing regulation defines:- how you will allocate profits
- what documentation is needed to justify prices
- how the future integration of the acquired company will fit into the existing TP policy
- Treaty shopping and use of tax treaties
Many clients initially take a superficial view of double taxation agreements.
Our task: to build a structure so as not to be accused of treaty shopping, while preserving available benefits.
Regulatory regimes
- MiFID II, AIFMD, UCITS in the EU
These regimes define:- permissible types of investment services
- capital and organizational structure requirements
- regulatory reporting and investor protection requirements
When purchasing an existing licensed company, it’s important to assess:
- how well its current business model matches your product
- how much adaptation (or license modification) will cost
- whether it is simpler to register a new structure for your model than to try to “roll out” an existing license
- VASP/crypto licenses
Crypto-sector regulation is dynamic. When buying a company with a VASP license (for example, in one of the EU countries or in Asia), an investor often wants to buy time.
But if the regulator changes its approach in the next 12–24 months (which is happening regularly now), you effectively face the same situation as when registering from scratch: reworking policies, new requirements for the capital buffer, enhanced AML procedures/CTF.
Due diligence when buying an investment company: a checklist for the owner
Over years of practice at COREDO we have built a structure for comprehensive due diligence, without which I would not recommend entering into a deal:
Due diligence – company review
- Charter documents, governance resolutions, history of amendments
- Contracts with key clients and partners
- Licenses, permits, correspondence with the regulator
- Existence/prospect of corporate veil lifting and personal liability of directors and UBOs
Financial due diligence
- Audited financial statements for 3–5 years
- Revenue structure (recurring / one-off / high-risk clients)
- Debt, off-balance obligations, guarantees
- Potential contingent liabilities (litigation, tax disputes, client claims)
Tax due diligence
- Tax history and audits
- Risks of additional tax assessments, fines, penalties
- Existing optimization schemes: whether they comply with current law and whether they risk being classified as abuse
AML compliance due diligence
- AML/CTF policies and procedures
- Actual practices for KYC / EDD / sanctions screening
- Transaction monitoring systems in use and their effectiveness (false positives, SAR backlog, client onboarding time)
- Quality of documentation: client files, risk assessments, escalation logs
Reputational due diligence
- Search for negative news, leaks, investigations
- Screening of key clients and counterparties
- Perception of the jurisdiction and the specific structure by banks and regulators
IT and data due diligence
- Architecture of CRM, risk systems, AML modules
- Software licenses, rights to algorithms (trading models, scoring engines)
- compliance with data protection and GDPR, especially when transferring client data across borders
How to calculate ROI of purchase vs registration
Chief financial officers traditionally compare:
- Cost of purchase (equity value + transaction costs)
- Cost of registering from scratch (establishment, license, initial capital, team)
Basic logic of ROI analysis
To evaluate a deal, standard metrics are used:
- NPV (Net Present Value)
- IRR (Internal Rate of Return)
- Payback period
- costs for compliance remediation (upgrade AML/CTF, review of KYC, review of the client base)
- cost of IT integration and post-merger integration (PMI)
- potential loss of revenue due to «cleaning» the client base (offboarding high-risk clients)
- impact on cost of capital: regulatory requirements regarding capital and risk reserves
In one case, a client viewed the purchase of a licensed investment company in the EU as a “saving” versus registering from scratch. After the COREDO team calculated:
- the costs of upgrading AML systems
- IT landscape migration
- reputational and tax adjustments
How do you structure a deal with escrow?
In the investment sector, the deal’s legal mechanics are not a formality but a tool for risk management.
Key elements I always recommend discussing:
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Share deal vs asset deal
- Share deal: faster and simpler in terms of licenses, but you take on all of the company’s past.
- Asset deal: cleaner in terms of historical risks, but in some jurisdictions more complicated regarding transfer of licenses and relationships with clients and the regulator.
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Escrow arrangements
Part of the deal price is held in an escrow account and paid to the seller only after a specified period and/or upon fulfillment of conditions (for example, no claims from the regulator or the tax authority).
-
Warranty & indemnity clauses / insurance
- Warranties: seller’s assurances regarding the absence of debts, investigations, undisclosed clients, etc.
- Indemnities: specific obligations to compensate losses if certain risks materialize (for example, a regulator’s fine for past AML breaches).
In several deals in the EU and the UK, W&I insurance is added, which complements the buyer’s protection.
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Post-acquisition integration plan
- how you will integrate teams and processes
- how you will migrate clients and data
- which AML efficiency KPIs to track (false positive rate, onboarding time, SAR backlog) in the first 12–18 months.
When should I buy or register from scratch?
I boil the choice down to several typical scenarios I’ve encountered at COREDO.
Rationale for buying a ready-made company
- You need to enter the EU market quickly with a MiFID II / AIFMD / VASP or payment license.
- The target company’s stable client base and its relationships with banks/custodians are important.
- You are prepared to invest in AML remediation and IT integration, and this is built into the model.
Rationale for registering from scratch
- You are building a new PE/VC fund, a management company, or a fintech platform with a long-term strategy.
- You need a clean reputation, a transparent UBO structure, and control over governance.
- You want to build a modern RegTech stack, KYC automation, and transaction monitoring tailored to your risks from the start, rather than “patching” someone else’s systems.
- You are considering jurisdictions where registration and Licensing are relatively predictable in terms of timing and requirements.
- Formulate your strategic objective (speed, geography, license type, investor structure).
- Assess available jurisdictions taking into account substance, taxes, the regulatory regime, and banking acceptability.
- Model two scenarios — acquisition vs greenfield — accounting for all compliance and integration costs, not only legal and registration fees.
The COREDO team has learned over years of work: a properly designed structure at the start saves years of time and millions on subsequent “fixes”. And it is precisely here that a sensible combination of registering from scratch and targeted acquisitions (up to a roll-up strategy) gives the business that balance of speed, control, and resilience that most of our clients strive for.