Role of a Nominee Director

Role of a Nominee Director

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Singapore is a major attraction for entrepreneurs to relocate their businesses here. It is known for its excellent location being strategic and convenient, allowing accessibility to many markets. Singapore’s benefits ranges from its strategic location, highly skilled talent pool, stable political environment as well as attractive tax benefits. Thus, many aspiring entrepreneurs are more inclined to start a company in Singapore.

What is a Nominee Director

In order to successfully incorporate a company, one must appoint a Singaporean or Singapore Permanent Resident (PR) to be on the company’s board as part of the Companies Act of 1967. A nominee director essentially acts like a figurehead of the company. They hold no power in your company to interfere with any business decisions as their primary responsibilities are to act in accordance with the directions of the actual business owners.

Who Needs a Nominee Director?

One of the most difficult challenges for foreigners when registering a company in Singapore is meeting the requirement of a local director, especially if they have no connections here. To address this issue, foreigners can hire locals to serve as their nominee directors. This is to ensure that if a company violates or breaks a law, someone can be held accountable to Singapore authorities. Additionally, even if you are a local resident, you can opt for a nominee director if you do not want your name to appear on the public registry.  

Can a Nominee Director Cause Risk to a Company?

As far as their responsibilities lie, the nominee director is not able to cause any risk to a company as they do not hold shares of the company. In Singapore, the government allows foreigners to own 100 percent of their shares, allowing them to appoint nominee directors to complete the Accounting and Corporate Regulatory Authority (ACRA) registration process while they get to keep all the shares.  As a result, nominee directors with zero shares do not hold any power over influencing the decisions of the company that other shareholders have.  

What Risks Do Nominee Director Hold Themselves?

From the nominee director's perspective, acting as the director of your company entails a significant risk. This is because they are the ones held accountable to Singapore authorities when a company violates the laws. They will then face penalties based on the severity of their misconduct, and they may even be prosecuted.  

Hiring the Right Nominee Directors

The right nominee director for a company must be qualified to do so. To become a nominee director, the person must be:

  • Of at least 18 years old and be of full capacity. This would mean to be a person who understands the obligations and consequences of their actions.

Furthermore, they should not have the following qualities below which would disqualify them to act as a nominee director:

  • Individuals who have not paid previous returns in previous years
  • Individuals who have declared bankruptcy are unable to remain or be appointed as a nominee director
  • Individuals of an insolvent company who are unable to pay their debts and cannot meet their financial obligations.
  • Individuals who have been convicted of certain criminal offenses such as fraud and dishonesty
  • Individuals who have been convicted of at least three offenses related to company registration filing within the last five years
  • Individuals whose company has a conflicting interest against national security  

It is best to find a credible company that provides corporate service to find qualified individuals to act as your company’s nominee director as the whole checking procedure tend to be complicated for someone inexperienced. Usually, corporate service providers will conduct a Know Your Client (KYC) to reliably check the soon-to-be nominee director to ensure that the client complies with the standards. Sourcing for a corporate service provider then simplifies the process and helps to speed up your incorporation process.

Sprout With Us!

Allow Sprout Asia to be your corporate service provider to guide you through all the complicated procedures. We have a variety of corporate secretarial service and incorporation packages for different needs. Let us manage your compliance so that you have time to focus on the core of the business!