Risks of using a nominee director in Singapore
While there are many pros of engaging a nominee director in Singapore, there may be some risks and disadvantages for such arrangements.
1. Difficulties in bank account opening with a nominee director
2020 and 2021 (let’s hope not any more than that), a sequence of events has landed us in one of the most difficult times to open corporate bank accounts.
Even pre-COVID, anti-money laundering (AML) laws were already facing scrutiny after a series of high-profile fraud cases.
COVID hit, no more travels. Banks were forced to conduct remote corporate account openings.
The use of nominee directors was at an all-time high. Banks are fully aware who are nominees and who are real directors.
It became difficult for foreign entrepreneurs to conduct business in Singapore, thus not being able to prove a tax substance here.
If you can’t justify a tax substance, or the need for a bank account in Singapore, you’re not going to get that bank account!
Times have changed and what used to be an administrative effort successful in a few days, is now a full team effort with weeks of strategic planning. We now know that tax substance is what banks are looking for- and we’ve prepared solutions for our clients. After all, without a bank account, how will your business run?
2. Nominee directors still have the final decision
Your nominee director is still a director! Most of the powers of a Singapore company are vested in the board of directors. The members of the board of directors have the final say over the company’s affairs.
They are answerable to the shareholders of the company. Since a nominee director is a member of a Singapore company’s board of directors, the preceding facts also apply to nominee directors.
Recommendation: Always have a legal written nominee arrangement with your chosen nominee director. At Paul Hype Page, we have a well-defined legal statement that illustrates how our Nominee Directors do not get involved with business operations and are only to fulfil mandatory regulatory requirements.