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Advantages & Risks of Using a Nominee Director in Singapore

9 min read|Last Updated: November 4, 2022|
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If you’re reading this, you would know by now that to incorporate in Singapore as a foreigner, you need at least 1 local director who is a Singapore Citizen, Singapore Permanent Resident or holds a valid and relevant work visa like an Employment Pass (EP).

Reasons why you need a nominee director in Singapore

There are 2 key reasons why you will need to appoint a nominee director in Singapore:

  • In the short-term when you are applying for your EP

  • In the long-term when you look to remotely operate an offshore company in Singapore

If you’re getting an EP, let me introduce you to the handbook of success here.

If you’re planning to use a nominee director in the long run, we’ll dissect the pros and cons of doing so.

Pros of using a nominee director in Singapore

The advantages of using a nominee director in Singapore are:

  • Easily fulfil the ACRA requirements of having a local director (if you are a foreigner)

  • Confidence that your company is always compliant given the nominee director will have extensive knowledge on the regulations of the jurisdictions, especially with ACRA and IRAS

  • You will have a physical company’s address in Singapore

  • Nominee directors often perform their due diligence to ensure the company is run well

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.

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What to expect when using a nominee from a service provider

Now that you’re comfortable with the idea of using a nominee director in Singapore, let’s explain the common industry practices, and why some service providers require security deposits.

It is common for nominee service providers to package their nominee directors with an accounting service and request for refundable security deposits. This is because their nominees still hold the same duties, obligations, and responsibilities as a regular director. If in any case companies are non-compliant with the annual compliance or are conducting fraudulent activities, the nominee would be just as liable as the regular director.

  • A Director’s fiduciary and statutory duties will include:
    • Preparing and filing statutory documents with the company secretary
    • Manage all of the company’s accounting records and annual accounts
    • Calling for meetings (EGM and AGM)
    • Maintaining and keeping records of companies binding the company to contracts with suppliers, debtors, creditors, etc.
    • Dealing with the company’s constitution
    • Registering a local business address
    • Providing regular updates about the registration of shareholdings
  • If a director breaches his duties, the company can do any of the following:
    • Sue for damages, or a fine of up to SG$5,000 or to imprisonment for up to one year.
    • Demand the return of a secret profit or specific property
    • Declare the act invalid
    • Removal from office
    • Setting aside transactions
    • Claim damages or compensation for financial losses incurred
    • Criminal fines
Eric

Steps to incorporate with nominee director

An overview of incorporating in Singapore with a nominee director:

  • Step 1: Understand the role of nominee director and sign off the agreement. Nominee Director is someone who acts as a non-executive director on the board of directors of a firm. Typically, there is no shareholding requirement for the nominee director unless arranged otherwise. Paul Hype Page offers nominee director services for statutory compliance only. The nominee director will not be involved in any management, financial, or operational matters of the company. You must appoint one or more individuals (normally the company shareholders) as the company directors who will be responsible for running the company. You can ask our nominee director to resign at any time by identifying another person who can satisfy the local director requirement.
  • Step 2: Register an account on our iBizFile platform and fill up our 5 minute incorporation form.
Eric
  • Step 3: Make payment on our platform.
  • Step 4: In 15 minutes, you can finish uploading supporting documents, fill up our Know Your Client (KYC) form and sign registration documents.

KICKSTART YOUR COMPANY INCORPORATION WITH REGIONAL EXPERTS TODAY

Come down to our office or get in touch virtually for an incorporation assessment to establish your Singapore company today.

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FAQs

Can a Nominee Director be a Foreigner?2020-11-12T10:20:58+08:00

No, a nominee director cannot be a foreigner. This is because a nominee director is appointed to fulfill the requirement of at least one local director of a Singapore company, thus, no foreigner is allowed. 

Can I ask the nominee director to resign from my company?2020-11-12T10:21:08+08:00

Yes, you can resign the nominee director at any time once you have obtained your Employment Pass or / you have identified another person who can satisfy the local director’s requirement. 

Why is a Nominee Director’s position within a company limited?2020-11-12T10:21:19+08:00

A nominee director is not granted the same powers and privileges as those granted to a conventional director. A nominee director is only the director of the company in a name. Therefore, the nominee director’s position within the company ought to be limited. 

Can any bank be used to open a Corporate Bank Account?2020-11-12T10:21:30+08:00

There are no restrictions on which banks can be used to open a corporate bank account in Singapore. Thus, a company owner may select any bank for the opening of the corporate bank account. We recommend ASPIRE for its user-friendly features.  

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