What is a Nominee Director
This is a person acting as a non-executive director for a firm representing another person or company. This typically is a non-shareholding position. In Singapore, it’s a requirement that at last one director of a limited company be a resident and if the company has no local as one of the directors, then a nominee must be engaged to fill that purpose.
Some situations require hiring a Singapore nominee director at the setup stage of the company as the foreign owners process employment passes and work visas. The owner can process their papers to become residents and be the resident directors or just maintain the services of the hired resident director. If it is an offshore company, then it will require permanently hired director services in Singapore. It is the resident director who is held to account for all the statutory requirements. In the case of any failure of compliance, he is the one to face prosecution.
The duties of the hired directors
- They serve as permanent nominee directors for offshore companies.
- Provide temporary resident director services during business setup and processing of work visas.
- They perform the duties as any other director of the company.
- He provides the statutory compliance obligations to the company.
- He doesn’t take part in the financial operations, and daily management of the enterprise.
- Takes on the duties of a non-executive director.
Who can you choose as a director?
- Singapore citizen or permanent resident.
- A person with a residential address in Singapore
The risk or a nominee director in Singapore?
It is no secret that hiring this type of director has its risks both for the hired director and the company hiring him. The company takes a risk hoping that the resident director will not make unauthorized transactions, misrepresent the company, or fail in his statutory duties. The director too takes a risk hoping the company shall not commit any fraud or illegal activities that may land him in trouble with the law. Companies fold and leave the country without warning leaving the director holding the bag not knowing what to do or say.
Nominee Director Engagement/Hiring Process
Conduct a know your client assessment
This is done by the company providing the nominee service to ensure you satisfy the requirements to be taken as a client. This involves assessing the information about the intended business, financial and operational plans for the company into the future and a background check on all the main stakeholders.
It is the time to also conduct a close assessment of the service provider, their history, and professionalism. You should also check on the ownership and alliances the company has in Singapore.
Determination of the fee
Based on the initial analysis, both parties can agree on a fee depending on the terms, for example, monthly rates, annual rates and how long the relationship is expected to last. The risk profile of the nominee service provider is very crucial. Some companies can give you directors whose main aim is to fleece the company. Both parties discuss the business and legal aspects of the operations depending on the expected company turnover and plan to hire locals. Other than the agreed fee that ranges $1500 to $2000, your may be asked for a security deposit that can cover the fees and penalties in case of your company folding or earning government fines.
Agree on the conditions
Before signing the agreement, you must work on the details and negotiate where possible, the conditions of engagement with the resident director. These can include:
- Appointing the director for the sole purpose of fulfilling the statutory requirements of the laws of Singapore regarding incorporation of foreign-owned firms.
- Agreeing on secretarial duties with the service provider to fill tax and company returns.
- Agreeing on bank account opening rules and if the hired director should be involved.
- How regularly to receive tax, bank and other relevant statements.
- How to terminate the arrangement. This includes the number of notice days each party can give and under what circumstances can it be given.
Other than the initial requirements, there have to be ongoing requirements between the parties for a fruitful and beneficial relationship. You must keep assessing the performance of the service company and the specific director nominated by you in Singapore. If for some reasons you are not satisfied with the services of the company or the specific director, you can ask for the resignation of the person so that another one can be assigned or terminate the services of the company.