Dummy corporation

Dummy corporation

A dummy corporation or dummy company is an entity created to serve as a front or cover for one or more companies. It can have the appearance of being real (logo, website, and sometimes employing actual staff such as for public relations) but lacks the capacity to function independently. The goal of a dummy corporation can be to conceal true ownership and/or avoid taxes.[citation needed] A dummy corporation is one way to cook the books in a dishonest attempt to hide the true financial status of a company. Another use is to prevent speculators from interfering with the holding organization's plans.

An example of a dummy company is the now-defunct Japan Asia Airways (JAA). JAA was created in 1975 as a fully owned subsidiary company owned by Japan Airlines (JAL) designed to fly the Japan-Taiwan route, which was a politically sensitive issue due to Japan's normalization of relations with the People's Republic of China.

Another example is Walt Disney World Company use of Compass East Corporation which was incorporated in Delaware on December 7, 1964. On September 30, 1966, Latin-American Development and Management Corporation, Ayefour Corporation (a pun on Interstate 4), Tomahawk Properties, Incorporated, Reedy Creek Ranch, Incorporated, and Bay Lake Properties, Incorporated, all Florida corporations, were merged into Compass East Corporation. These companies were responsible for buying up the land that would become the Walt Disney World Resort.

Sometimes natural conservation groups use a dummy corporation to purchase land. The current owners might be reluctant, figuring they are not getting the best price for a non-profit, but if the purchase is to a dummy corporation with "land development" in the name they might be more willing to sell.

At times governments might set up dummy corporations to hide actual intent. Air America was an American passenger and cargo airline covertly owned and operated by the Central Intelligence Agency (CIA) from 1950 to 1976. It supplied and supported covert operations in Southeast Asia during the Vietnam War.

Contents

Use in crime

Dummy corporation to defraud

Dummy corporations may be created by fraudsters to create the illusion of being an existing corporation with a similar name. Fraudsters then sell securities in the dummy corporation by misleading the investor into thinking that they are buying shares in the real corporation.

Dummy corporation to hide identity

Dummy corporations may be used in crime to hide the identity of a criminal, similar to the use of a criminal alias.

See also

References


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Look at other dictionaries:

  • dummy corporation — n. A corporation with no legitimate business purpose formed to protect its founders from liability or to hide their activities. The Essential Law Dictionary. Sphinx Publishing, An imprint of Sourcebooks, Inc. Amy Hackney Blackwell. 2008 …   Law dictionary

  • dummy corporation — Corporation formed for sham purposes and not for conduct of legitimate business; e.g. formed for sole reason of avoiding personal liability …   Black's law dictionary

  • dummy corporation — Corporation formed for sham purposes and not for conduct of legitimate business; e.g. formed for sole reason of avoiding personal liability …   Black's law dictionary

  • dummy corporation — A corporation organized and acting ostensibly as a corporation, but in reality having no real corporate purpose, having been organized with the motive of avoiding personal liability on the part of the incorporator and sole stockholder. Chesapeake …   Ballentine's law dictionary

  • corporation — cor·po·ra·tion /ˌkȯr pə rā shən/ n [Late Latin corporatio, from Latin corporare to form into a body, from corpor corpus body]: an invisible, intangible, artificial creation of the law existing as a voluntary chartered association of individuals… …   Law dictionary

  • dummy — [dum′ē] n. pl. dummies [< DUMB + Y2] 1. [Old Slang] a person unable to talk; mute: an offensive term 2. a figure made in human form, as for displaying clothing, practicing tackling in football, etc. 3. an imitation or sham; substitute for the… …   English World dictionary

  • dummy — dum|my1 [ dʌmi ] noun count ▸ 1 model of object ▸ 2 model of someone s body ▸ 3 unintelligent person ▸ 4 in card game ▸ 5 movement to trick someone ▸ 6 for baby to suck 1. ) something that is made to look like a real object, used either for… …   Usage of the words and phrases in modern English

  • Dummy (album) — Dummy Studio album by Portishead Released August 22, 1994 Rec …   Wikipedia

  • dummy director — n. A director of a corporation who is in fact merely a figurehead and who has no real interest in the corporation. The Essential Law Dictionary. Sphinx Publishing, An imprint of Sourcebooks, Inc. Amy Hackney Blackwell. 2008 …   Law dictionary

  • Dummy Director — A person on a company s board of directors who votes and acts on the wishes of a non board member. Dummy directors are most commonly used when a private company is in the process of going public, and it needs to establish a board of directors… …   Investment dictionary

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