Risks of Using Nominee Directors
Ideally, all nominee directors ought to be appointed through a legal written arrangement. This is to safeguard the well-being of the business owner and the status of the company as a legal entity.
The risk of failing to use proper documents to set up the arrangement is that damages which cannot be controlled may be incurred.
Other potential risks of using a nominee director include the following
- The company owner damages the relationship with the nominee; this may sometimes end up with the nominee treating all shares received as a gift and therefore incorrectly claim entitlement as the real owner of the shares in the company
- The nominee demands more payment
- The nominee passes away or loses mental capacity and their next of kin refuses to recognize the arrangement and seeks to treat the shares as their right
- The nominee becomes uncontactable
- The nominee uses the shares as security for a personal loan, sells them, or takes the director’s service fee for personal use
- The nominee discloses the arrangement to a third party
Hence, the importance of using well-written documents to record a nominee director arrangement cannot be overstated, given the risks highlighted above.
Reasons to Appoint a Nominee Director
There are various reasons for using a nominee director. Singapore company laws require foreign investors setting up companies in the Republic to appoint an ordinarily resident director and a resident company secretary.
The director must be a Singapore citizen, a permanent resident, or a holder of one of Singapore’s valid work permits. However, there are situations in which a foreign business cannot find a local partner.
If you do not have a nominee director, you may contact us at Paul Hype Page & Co. We have the expertise and resources to handle this situation in a professional, easy, and efficient manner. We will provide you with the best nominee director services that we have.
We will also ensure that the nominee director we select for your company has never violated the corporate laws of Singapore.
We will also ensure that the nominee director we select for your company has never violated the corporate laws of Singapore. Recently, several nominee directors have done so. Some of the offenses committed by such errant nominee directors include those which have implicated them for their role within a money-laundering network. This will never be the case for any of the nominee directors we will select for your company.
One of the primary advantages of this appointment is the privacy of the shareholder or the ‘actual’ director. The nominee director may proceed to set up the company’s bank account, complete the taxation registration, and obtain the required licenses for the purposes of business operations. This will save time for the owner who can now concentrate on growing the business. It will also save the owner much money.
The role of a nominee director is not illegal under Singapore law if it is used for legitimate reasons. The existence and identity of the company owner is recorded for the benefit of public agencies such as the Inland Revenue Authority of Singapore (IRAS) and ACRA.
ACRA states: “A director must make decisions objectively, act in the best interest of the company, avoid conflicts of interest, and be honest and diligent in carrying out his duties.”