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The main aim of appointing a Singapore nominee shareholder is to protect the beneficial owner’s identity from public disclosure. According to Singapore’s laws, a nominee shareholder can be an individual or corporate entity, authorized by the share owner. The shareholder must hold one of these statuses: Permanent Resident, Employment Pass holder, or Dependant Pass holder, regardless of citizenship.

Appointing a Nominee Shareholder

The nominee shareholder must be appointed during the document drafting stage of the company registration process. This is because the name of the nominee shareholder must be clearly stated in the shareholder information section of the incorporation documents.

Establish a nominee shareholder arrangement properly with a Declaration of Trust, a signed agreement between the beneficial owner and the nominated shareholder(s). This document safeguards the rights of the beneficial owner regarding dividends and share-generated income. Importantly, it explicitly states that the nominee shareholder has no legal claims over the shares.

When registering a nominee shareholder, the beneficial owner’s details and shares allotted to the nominee are required. The nominee shareholder must submit an annual return to keep ACRA updated.

Reasons to Obtain Nominee Shareholder

  • Employment Restrictions: Your employment terms prevent you from establishing a company, even if the new company does not directly compete with your employer.
  • Non-Compete Agreement: You’re considering resigning from your current job, but the non-compete period prevents you from incorporating a company early.
  • Notice Period: You’re about to resign from your current job, but you are serving a notice period and want to begin incorporating a new business as soon as possible.

Roles of Nominee Shareholder

Nominee shareholder fulfils various duties and responsibilities, including

  • Voting Rights and Dividends: Nominee shareholders vote as instructed by the nominator and receive dividends on their behalf.
  • Legal Compliance: Nominee shareholders ensure compliance with laws, regulations, and reporting obligations, including filing annual returns and maintaining corporate records.
  • Fiduciary Duty: Nominee shareholders have a fiduciary duty to act in the best interest of the nominator and avoid personal gain. The nominator retains rights to dividends, attending meetings, and exercising other shareholder rights.

Nominee Shareholder Agreement

A nominee shareholder agreement a legally binding contract between the actual nominator and the nominee shareholder. It outlines their rights, obligations, and limitations regarding the shares held under the nominee’s name. It is highly recommended to have a nominee shareholder agreement when appointing a nominee shareholder as it protects the interests of all parties involved and clarifies their roles and responsibilities.

A nominee shareholder can either be another individual, not necessarily a Singapore resident, or any offshore company that provides these services. Companies offering nominee shareholder services are preferred over individuals because they are regulated, organized, and provide additional safeguards against corporate malpractice.

Benefits of a Nominee Shareholder

In Singapore, company registration records are publicly accessible, allowing anyone to identify directors and shareholders of a company by paying a nominal fee. This accessibility extends to personal details of these individuals.

However, nominating a shareholder provides a means for maintaining privacy. By registering a nominee shareholder, only their name appears on records held by the Singapore Accounting and Corporate Regulatory Authority (ACRA). Consequently, the beneficial owner can remain entirely anonymous to the public. This confidentiality is of significant benefit as it safeguards personal information, particularly from competitors within the same industry.

Risk of Nominee Shareholder

  1. Nominee treating shares as a gift: The nominee shareholder wrongly claims ownership of the shares, disregarding the initial arrangement.
  2. Nominee becomes uncontactable: Communication is lost with the nominee shareholder, making it difficult to manage or retrieve the shares.
  3. Nominee acts in self-interest: The nominee shareholder makes decisions regarding the shares that benefit themselves rather than acting on behalf of the actual owner.
  4. Demand for payment: The nominee shareholder demands payment or increased payment before fulfilling the terms of the arrangement.
  5. Nominee passes away or becomes incapacitated: If the nominee shareholder is no longer able to fulfill their duties, their representatives may refuse to recognize the initial arrangement, complicating the ownership of the shares.
  6. Disclosure of arrangement: The nominee shareholder reveals the details of the arrangement to third parties, potentially leading to further complications or breaches of confidentiality.

In the unfortunate event that any of the above situations occur, you will face the risk of:

  • Dealing with the undesired consequences of an unprofessional nominee shareholder.
  • Legal lawsuits and associated legal costs.
  • Losing your anonymity and confidentiality to the public.
  • Losing ownership of the shares held by the nominee shareholder.

Risks of a Nominee Shareholder

Risks set in when a shareholder is not appointed in a proper and professional way as there may be possibilities that:

  • The nominee assumes the share is a “gift”
  • The dominee demands an unreasonably large payment for the appointment
  • The nominee dies with his or her hair assuming the shares as property of the deceased
  • The nominee loses mental capacity, with his or her heir assumes the shares as property of the mentally incapacitated individual
  • You lost contact with the nominee
  • The nominee reveals the arrangement to others
  • The nominee uses the shares as an authority

In the unfortunate event that any of the above takes place, you will face the risk of:

  • Dealing with the undesired consequences of an unprofessional nominee shareholder.
  • Legal lawsuits and associated legal costs.
  • Losing your anonymity and confidentiality to the public.
  • Losing ownership of the shares held by the nominee shareholder.

Nominee Director VS Nominee Shareholder

This is a common basis of confusion for many when appointing a nominee shareholder.

Nominee Shareholder will act on behalf of you in your company. Your information will not be disclosed on Government and the company’ documents.

Required documents:

  • Copy of passport and residential addresses proof of all shareholders. If the shareholder is another corporation, please provide us with the Company’ documents such as Certificate of Incorporation, M&AA, Registered of Director/Shareholder, etc.
  • Amount of share capital and percentage of shareholdings

On the other hand, With the Nominee Director, your information will not be disclosed on Government and the company’ documents and you still have the full control of your company through the Power of Attorney (POA).

Required documents:

  • Copy of passport and residential addresses proof of all directors. If the director is another corporation, provide us with the Company’ documents such as Certificate of Incorporation, M&AA, Registered of Director/Shareholder, etc.

In most cases, the nominee director and nominee shareholder can be the same person. The nominee director acts solely on the instructions of the real company owner, with no control over the company.

Alternative Routes

Another practice in the past was to issue bearer shares for the proxy owner. These bonds contain no identification or name. Global measures against money laundering addressed rampant fraudulent practices, leading to a decrease in its popularity as a common practice.

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