What Is A Nominee Director & Why Do You Need One?

What is a Nominee Director?

A Nominee Director is an individual appointed to fulfil the statutory requirement of a local director in the cases where foreigners in Singapore want to either start a company or expand their existing operations into Singapore. A Nominee Director is considered unequal to a regular company director, even though, under the laws of Singapore they possess the same responsibilities as a regular director. In most cases, Nominee Directors will not have executive authority over decisions within the company they are appointed to. However, Nominee Directors are permitted with standard transparency and oversight in the company they are employed at in order to report any illegal activity and ensure that the company is operating within the law. Examples of fraudulent corporate activity include tax avoidance, violation of laws and theft.

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Who can be a Nominee Director of a Company?

According to the Companies Act of 1967, Nominee Director must possess one of the following:

• Singaporean Permanent Residency

• Singaporean Citizenship

• Employment Pass of the company in which he/she is employed as a director + Permanent Address in Singapore

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Statutory Requirements of a Nominee Director?

The statutory requirements put in place to hire a Nominee Director are done to protect your company and the markets you operate in. Below state the requirements that a potential Nominee Director must meet before employment.

1. He/She has not committed criminal offences of fraud and dishonesty.

2. He/She does not possess a disqualification order made against him/her in court.

3. He/She does not possess 3 or more High Court orders regarding compliance under the Companies Act within 5 years time.

4. He/She has not committed 3 or more offences under the Companies Act within 5 years time.

5. He/She is not experiencing undischarged bankruptcy.

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Additionally, every candidate preparing to be a Nominee Director is required to fill the Form 45 before assuming the position. Form 45 outlines both clauses that would disqualify a candidate and functions that a Nominee Director would be required to carry out (as a consent form for those who qualify). The formal reference to the Form 45 document is: Consent to Act as Director and Statement of Non Disqualification to Act as Director.

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What are the roles and responsibilities of a Nominee Director?

A Nominee Director’s primary duty is to ensure that the company they are employed at abides by Singapore’s corporate laws. However, they also carry out other tasks similar to those carried out by a regular company director being, ensuring corporate governance and employing the best practices for corporate social responsibility. The reason behind why Nominee Directors are mandatory is because without accountability being placed on a Nominee Director, if foreign companies were to violate Singapore’s corporate laws, the company directory can easily abandon their company and depart Singapore with minimal consequences.

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What is the authority of a Nominee Director?

The role of a Nominee Director is considered to be a non-executive role as they are hired in order to satisfy the Companies Act requirement and provide accountability to the companies that have hired them. As far as authority goes, a Nominee Director can have little to none. Despite that, they are still be expected to be accountable for the decisions the company makes. Due to this, Nominee Directors are allowed full transparency of all company operations, so that they can report any illegal activity. Thus, they are not put in at disproportionate risk as this decreases the chances of companies utilizing Nominee Directors as loopholes to conducting business within Singapore.  

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Does Your Company Need a Nominee Director?

According to the Companies Act, a company incorporated in Singapore must have at least one local resident as a director. If you are a foreigner looking to incorporate a company in Singapore but is unable to fulfil the requirements of having a local director, you will need to engage a Nominee Director. This applies to foreigners on an existing Singapore Employment Pass and can only be the shareholder of the company as well.

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How can you find Nominee Directors?

In order to find a Nominee Director for your company, you can contact a reputable corporate service provider which can guide you to ensure you find a reliable Nominee Director to assign to your company.  

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Engaging a Nominee Director at Sprout

Here at Sprout we work with an array of credible Nominee Directors with proven track records and we help protect the arrangements between the Nominee Director and yourself. Clients that have signed up for our Nominee Director packages will be provided with an agreement that will capture the nature of the relationship and authority of the Nominee Directors. To get started, set up a free consultation with a Sprout representative to discuss the specifics of your business!

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FAQ

• Q: What is the difference between a director and Nominee Director?

A: Nominee Directors are limited by their residency, in the sense that a regular director can be a resident of any country however a Nominee Director must have a Singaporean residence or permanent address in Singapore. Nominee Directors are considered non-executive authority as they are appointed in order to satisfy the requirement stated by the Companies Act. Thus, even though he/she is allowed complete transparency of the corporate affairs of the company, his/her authority is limited according to the preferences of the company they represent. In most cases, Nominee Directors will not have executive authority over decisions within the company they are appointed to.  

• Q: Is a Nominee Director an agent?

A: No, a Nominee Director is not an agent, but rather an overseer required by the law to supervise a company’s corporate affairs.

• Q: How do I appoint a Nominee Director?

A: In order to appoint a Nominee Director, one must contact a reputable corporate service provider, who will then carry arrange a reliable Nominee Director to assign to your company.

• Q: Can a Nominee Director open a bank account?

A: The nominee director can assist with the bank account opening as some banks may require the nominee director’s signature for bank account opening. However, they will not be the authorised signatory of the bank accounts.