A nominee director is a person who is appointed as a company director, but acts according to another person’s directions. Nominee directors have the same legal obligations as other directors, such as being required to discharge their duties responsibly, with honesty and reasonable diligence.
The Singapore Companies Act stipulates that every Singapore company must have at least one director who is a resident of Singapore (i.e., a Singapore citizen, permanent resident, or foreigner holding a valid work pass).
For a 100% foreign-owned company in Singapore, if you cannot find or there are no suitable local directors, a nominee director would be a good option.
1. Duties of a Nominee Director
- A nominee director typically does not participate in the day-to-day decision-making or management of the company. Their role is generally limited to fulfilling the legal requirements of being a director.
- However, even as a nominee director, they are still required to perform their legal duties, such as attending board meetings and ensuring the company complies with relevant laws.
2. Reasons for Having a Nominee Director
- Legal Compliance: Foreign businesses often use nominee directors to fulfill the statutory requirements when setting up a company in Singapore.
- Convenience: Nominee directors provide a convenient solution, especially for foreign investors who wish to establish a company in Singapore without having a local director.
3. How to Choose a Nominee Director
For anti-money laundering (AML) considerations, ACRA has continuously enhanced its supervisory and enforcement efforts for individuals assessed to be of a higher risk, such as those holding a large number of nominee directorships and exhibiting other traits of being at-risk. Nominee directors often have multiple companies under their name. If one of these companies encounters problems, the others may suffer as well. Therefore, when selecting a nominee director, it is essential to exercise caution and choose carefully. Entrusting a reliable agency can help mitigate this risk.
- Professional Service Providers: Many accounting firms, law firms, and corporate secretarial service providers offer nominee director services. It’s important to ensure that the service provider has a good reputation and adheres to compliance standards.
- Trust and Transparency: When selecting a nominee director, it’s essential to ensure they understand their legal responsibilities and can adhere to the relevant laws and regulations.
Conclusion
In Singapore, nominee directors are a common practice, especially when foreign companies establish a business in the country. They help fulfill legal requirements but also come with certain legal risks. When using nominee directors, businesses should ensure they select reputable service providers and maintain compliance to minimize potential legal liabilities and risks.
SOAS is a leading provider of integrated accounting, bookkeeping and company registration services in Singapore.With more than 17 years of experience and a team of dedicated professionals, we have successfully helped more than 1,000 organisations with complex corporate compliance and financial management issues.