What is a Nominee Director? Your Guide to Appointing One for Your Singapore Company [Updated 2024]
Are you a foreign entrepreneur facing hurdles with the directorship requirements for a company to be incorporated in Singapore? Then welcome to this detailed guide about nominee directors in Singapore. We’ll cover:
The essentials of what a Singapore nominee director is and their role.
The distinct functions nominee directors perform for your company.
How nominee directors can strategically benefit and protect your company.
The difference between nominee directors and executive directors.
When and why to opt for nominee director services.
If you still have more questions after reading this guide, remember that Piloto Asia is here to assist you every step of the way. No more Googling "nominee director Singapore"!
What Is a Nominee Director, and Why Does Your Singapore Company Need One?
A nominee director in Singapore is a non-executive director appointed to satisfy legal and regulatory requirements for companies lacking local management. Singaporean law makes it compulsory for all companies in the country to have at least one resident director.
However, foreign entrepreneurs may not have Singapore citizens, permanent residents, or Employment Pass (EP) holders in their management.
This is where a nominee director comes in. The term “nominee” specifies that the director role is non-executive and is used to only help satisfy regulatory requirements in Singapore.
Nominee directors do not participate or get involved in business operations, so they’re sometimes also referred to as Inactive Directors or Sleeping Directors.
But even if it’s a non-executive role, a nominee director must still abide by their general duties to ensure that the companies they are working with are compliant with Singapore laws.
They also bear both responsibility and legal liability for potential risks but corporate service providers mitigate this liability by taking appropriate insurances such as Directors & Officers Insurance Obligations or Deed of Indemnity.
What are the Roles and Responsibilities of a Nominee Director in Singapore?
In Singapore, a nominee director's roles include acting in good faith for the company, avoiding conflicts of interest, and fulfilling basic administrative duties like signing routine notices and approving annual accounts. They do not make business decisions or have executive responsibilities, aligning with a non-executive, compliance-focused role.
Nominee directors also:
Convening an annual general meeting
Execution of annual return (if requested)
In contrast, they do not:
Need to come to the office or need to be present at negotiations
Have any say at any internal company meetings
To ensure nominee directors do not overstep their authority, both the principal company (hiring company) and the nominee director sign a nominee director agreement that confirms the services done by the director are done in a nominee capacity.
In addition, a nominee director may request read-only access to the hiring company’s corporate bank account but only to help fulfill their fiduciary duties and regular accounting and tax filing duties. However, the principal company may or may not approve this request without worrying about getting penalized by the Accounting and Corporate Regulatory Authority (ACRA).
What Is the Difference Between a Regular Director and Nominee Director in Singapore?
The key difference between a regular director and a nominee director in Singapore lies in their roles and authority. Regular directors actively manage and make decisions for the company, while nominee directors fulfill statutory obligations without participating in management or decision-making, serving primarily to meet regulatory requirements.
Here is a quick table you can check out:
Professionally managed nominee director services include a nominee director arrangement, where the rights and responsibilities of the nominee director and the client are stipulated to protect their interests.
What Are the Requirements to Become a Nominee Director in Singapore?
To become a nominee director in Singapore, one must be a Singapore citizen, Permanent Resident, or EP holder with a permanent local residential address, and at least 18 years old.
In addition, the Singapore Companies Act specifies that a nominee director should not be:
An undischarged bankrupt. This means they are legally bankrupt but still have to pay back particular debts and can’t borrow again from financial institutions.
Convicted of any offence that involves fraud and dishonesty and carries an imprisonment term of more than three months.
Convicted by the court of three or more ACRA filing offences
Involved with three or more companies that ACRA struck off within five years.
Disqualified for Companies Winding Up on the grounds of National Security or Interest
Disqualified for Unfit Directors of Insolvent Companies
Disqualified for Failure to Make Returns
When foreign companies hire a professional nominee director service, they automatically ensure they are getting the right candidate that meets all of these criteria.
How to Appoint a Nominee Director in Singapore Step-By-Step?
To appoint a nominee director for your Singapore company, find a suitable candidate, draft a service agreement, arrange documentation, and complete verification with the ACRA. Here’s a deeper dive:
1. Find a Suitable Candidate
A nominee director can be someone you know personally, a corporate service provider candidate, or a trusted business associate (as long as they are a Singapore citizen and meet the eligibility criteria).
It’s important to conduct due diligence involving thorough background checks to ensure the candidate is competent, reliable, and qualified.
2. Draft a Service Agreement
After identifying a suitable candidate, you need to draft a nominee director service agreement. This document outlines the nominee director’s duties, conditions, responsibilities, and any limitations to their powers.
A written agreement is necessary as it sets out the expectations of the director and what they can and cannot do from the onset. A formal agreement also provides a basis to establish a breach in case the nominee director fails to fulfill their duties. This facilitates holding the director liable for any damages sustained by your company if there’s ever a need.
A nominee director service agreement should address the following points:
The nominee director’s power and obligations
The terms of the agreement
The fact that the nominee director does not have a managerial or operational role in your company unless otherwise specified
The fact that the director cannot give personal guarantees or make business decisions unless specifically instructed
The preferred dispute resolution method in case of a future dispute
Remember to conduct a thorough agreement review before signing it to ensure everything has been addressed.
3. Arrange Documentation
To appoint a nominee director, you must obtain a few required documents. These include:
Memorandum and Articles of Association
Incorporation certificates
Board resolutions
The documentation is important to ensure the director is properly appointed in compliance with local laws and regulations. You can arrange these documents from the company’s registered office or the ACRA.
4. Complete Verification With the ACRA
The candidate must then submit the required paperwork to the ACRA office to apply as nominee director. They will be required to submit personal identification and address details, which the ACRA will verify as part of the appointment process.
5. Inform Concerned Authorities
After the ACRA approves your nominee director, you must notify the relevant authorities of their appointment. This ensures the director fulfills statutory obligations such as maintaining proper accounting records, filing annual returns, and holding general meetings. In this way, a reliable nominee director will help your company maintain good standing with the authorities and minimize legal risks.
What Are the Risks of Appointing a Nominee Director in Singapore?
Appointing a nominee director comes with legal, regulatory, financial, and reputational risks. Let’s take a look:
Legal and Regulatory Risks: If any laws or regulations are breached during the appointment process, your company might face legal and regulatory consequences. This can include bans, fines, and even imprisonment of the nominee director.
Financial Risks: Financial risks can result from the nominee director’s failure to fulfill their responsibilities, leading to potential losses for the company. This is why it is vital to set clear expectations for the director's roles and duties before signing the service agreement.
Reputational Risks: A nominee director’s illegal practices can result in the company facing reputational risk.
To reduce these risks, it is essential to select a competent and reliable nominee director with a comprehensive understanding of Singapore’s Companies Act. You also want to work with a corporate service provider to make sure you get a background-checked candidate.
Maximize Your Business Success in Singapore with a Nominee Director
Uncover the strategic advantages of appointing a nominee director for your Singapore venture.
Our expert team at Piloto Asia is ready to guide you through every step, ensuring legal compliance and business efficiency.
Fill out the form below to connect with a dedicated account manager who will respond to your queries within one business day.
What is the Difference Between a Nominee Director and a Nominee Shareholder Singapore?
A shareholder is the legal owner of shares in a company and holds them directly in their own name.
They have full rights and responsibilities associated with the ownership of those shares, including voting rights and entitlement to dividends.
In contrast, a nominee shareholder holds shares on behalf of another person or entity, known as the beneficial owner.
While the nominee shareholder's name appears on the share register, they merely act as a representative or nominee for the beneficial owner, who retains the economic rights and benefits associated with the shares.
What Is the Requirement of a Nominee Shareholder?
The requirement for a nominee shareholder varies depending on the jurisdiction and specific circumstances.
Generally, the nominee shareholder must be willing to hold shares on behalf of the beneficial owner and follow the instructions of the owner regarding voting rights, dividends, and other shareholder-related matters.
Additionally, they may be required to comply with legal and regulatory obligations and disclose the identity of the beneficial owner to the relevant authorities upon request.
What Are the Benefits of Using a Nominee Shareholder?
Using a nominee shareholder brings advantages like enhanced privacy and confidentiality, as they conceal the actual owner's identity in public records. Here are three additional benefits of hiring one:
Asset Protection: By holding shares through a nominee shareholder, individuals can shield their assets from potential legal claims or public scrutiny.
Proxy for Voting and Shareholder Rights: The nominee shareholder can exercise voting rights and other shareholder rights on behalf of the beneficial owner, as per their instructions.
Flexibility in Ownership Structure: Nominee shareholders allow for flexible ownership arrangements, enabling shares to be held by nominees for multiple owners or facilitating complex ownership structures.
But at the same time, they come with several risks. Let’s check them out.
What Is the Risk of Using Nominee Shareholders?
The main risk of using nominee shareholders is a potential lack of control over shares, as the nominee legally holds them. Here are three additional risks to be aware of:
Regulatory Compliance: Nominee shareholder arrangements must comply with legal and regulatory requirements. Improper structuring or disclosure could lead to non-compliance or potential legal consequences.
Trust and Reliability: It is essential to choose a reliable and trustworthy nominee shareholder to ensure they act in your best interest and follow your instructions faithfully.
Potential Misuse: There is a risk of nominee shareholders being misused for illegal activities such as money laundering or tax evasion. Proper due diligence and compliance measures are necessary to mitigate this risk.
It is advisable to seek professional advice and carefully consider the risks and benefits before engaging in a nominee shareholder arrangement.
Can You Replace Your Company’s Nominee Director in Singapore?
need to work with a nominee director to fulfil incorporation requirements in Singapore. Yes, you can replace your company’s nominee director in Singapore. However, your company cannot operate in the country without one, meaning you must always have at least one local resident director or nominee director in your management.
If you are unsatisfied with your current nominee director, you can:
Hire another nominee director through other corporate service providers
Find a Singapore citizen, permanent resident, or EP holder who can act as your local resident director
You can also act as the only director in the company, but you need to get an EP for yourself. Some corporate service providers might be able to help you apply for an employment pass.
Once approved, you’ll be allowed to move and relocate to Singapore. You’ll be considered a resident director, so your company won’t need the services of a nominee director anymore.
But note that the process of acquiring an EP can take several months. Until the EP is in your hands, your company will still need to work with a nominee director to fulfill incorporation requirements in Singapore.
Common Client Questions About Nominee Director Services
Now that you understand what a nominee director in Singapore is, let’s answer a few client questions about nominee director services that we commonly come across.
Why Do Some Corporate Service Providers (CSPs) Require a Deposit for Nominee Director Services?
CSPs often require a security deposit when appointing nominee directors. This is because nominee directors can face potential liabilities, such as additional costs for indemnity insurance or statutory fees resulting from the company's late filings or inaccurate reporting. The security deposit helps cover these potential financial risks.
Why Do CSPs and Nominee Directors Ask For Details About the Business?
A nominee company director asks for business details because they need to perform an initial assessment of proper-and-fit criteria to ensure no conflicts of interest amongst the companies they represent.
Even though a nominee director is in a nominee capacity with no powers to operate the business, they still need to fulfill their fiduciary duties set by the ACRA. They also need to ensure that the companies they represent do not participate in illicit activities or operate without a license.
What Happens When a Company Gets an Uncontactable or Uncooperative Local Nominee Director?
Companies registered in Singapore usually replace their nominee directors if they are uncooperative or are no longer uncontactable. As a corporate service provider, we need to communicate upfront to our clients what is required from us and help them understand the scope and responsibilities of a nominee director.
Typical responsibilities that nominee directors are comfortable undertaking are signing year-end annual general meeting (AGM) and tax reporting documents and signing resolutions for bank account opening (without being the authorized signatory).
As mentioned earlier, we always provide our clients with a nominee director arrangement to protect both the clients’ and our interests. A third party is available to help liaise and mitigate problems when issues arise.
Do I Need to Appoint a Local Singapore Business Associate or a Local Employee as a Local Nominee Director?
You may appoint a local Singapore business associate or a local employee as a local nominee director as long as they fulfill all the requirements set by the ACRA.
Clients should never forget that despite the nominee nature of the role, the local business associate outside your company would still need to sign the company’s year-end reports as the local director.
This would mean disclosing sensitive information such as company profit and loss statements, shareholding changes, and changes in business dealings to this local business associate.
The same is also true for the appointment of a local employee as your local director. We have had clients appoint senior personnel, such as a Singaporean General Manager or Country Head, as their local director.
However, there are cases where headquarters still retain decision-making powers and do not have a regional general manager in place, so they may want to keep sensitive information such as business restructuring away from local staff.
In the end, we still recommend that clients work with an external nominee director to avoid all of these possible conflicts of interest.
Why Should You Hire a Nominee Director Service in Singapore?
Hiring a nominee director on your own comes with serious risks. For example, a nominee director might take advantage of another director’s powers to take over shares or even the business. Remember, you need to stipulate the limitations of their authority and influence within the company as a nominee director in your written contract.
The other reason is convenience. Most corporate service providers already include nominee director service in their incorporation package, so you don’t have to worry about hiring another provider.
In Closing
A nominee director is a crucial requirement for incorporating a company in Singapore. For a deeper understanding of how to appoint a nominee director, we invite you to connect with us.
Reach out to our expert local account managers via email, and expect a response within one business day. Let's discuss how we can assist you in meeting your company's specific needs with our professional nominee director services!
Frequently Asked Questions about Nominee Director
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The fee for a nominee director in Singapore can vary depending on the service provider and requirements. Generally, it ranges from around SGD 1,000 to SGD 5,000 per year. Additional charges may apply for specific services. Consulting multiple service providers helps determine the best option for your needs.
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Nominee director services in Singapore typically involve the appointment of a professional individual or firm to act as a nominee director on behalf of a company. These services are commonly offered by corporate service providers, law firms, or specialized nominee director service providers.
The specific services provided by a nominee director may vary depending on the arrangement and the service provider. However, common nominee director services in Singapore include:
Local Directorship: The nominee director fulfills the statutory requirement of having at least one resident director in Singapore for company incorporation and ongoing compliance purposes.
Compliance Support: The nominee director assists in meeting regulatory obligations by ensuring compliance with relevant laws, regulations, and corporate governance requirements.
Corporate Governance: The nominee director may provide guidance on corporate governance matters, board meetings, and decision-making processes.
Administrative Duties: The nominee director may handle administrative tasks such as signing documents, maintaining statutory registers, and filing annual returns with the authorities.
Risk Mitigation: The nominee director helps mitigate risks associated with personal liabilities and responsibilities that directors may bear.
It's important to note that while a nominee director may provide these services, the ultimate responsibility for managing the company's operations and decision-making lies with the company's actual directors and shareholders.
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A nominee company is a legal entity used to hold shares or assets on behalf of another individual or entity. This arrangement provides a degree of anonymity and privacy for the true owners, as the nominee company acts as the legal holder of the assets or shares.
The beneficial owners retain the economic rights and benefits, while their identities are shielded from public records.
Nominee companies are commonly used to protect privacy, facilitate undisclosed transactions, or for asset segregation. It is crucial to ensure compliance with legal and regulatory requirements in such arrangements, and consulting with professionals is advised to ensure legitimacy and adherence to applicable laws.
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A nominee director in Singapore is an individual, often provided by a professional services firm, appointed to the board of a company to meet the legal requirement of having at least one director ordinarily resident in Singapore. They are typically non-executive directors and have no power or authority to manage the company or make decisions on its behalf.
Now, you might be asking, what is a holding company? A holding company is a parent corporation that owns enough voting stock in another corporation to control its board of directors and, therefore, its policies and management. So, if your holding company is not based in Singapore but owns a subsidiary there, a nominee director service can be useful in fulfilling the statutory requirements in Singapore without necessarily involving the actual owners or stakeholders of the holding company. However, it's important to note that the nominee director does not have any actual control or significant influence over the subsidiary company, but merely serves as a legal figurehead.
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A nominee director is not liable to pay corporate tax in Singapore, as they are not considered a beneficial company owner. The tax liability for the company will still rest with the shareholders or the real owners of the company.
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The Singapore income tax filing deadline for nominee directors 2023 is April 15, 2024. This is the same deadline for all other taxpayers in Singapore. Nominee directors are appointed to act as directors of a company on behalf of the real owners of the company.
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Nominee directors are instrumental in facilitating strategic planning for a wide range of businesses in Singapore, including investment holding companies, parent corporations, and other holding companies with diverse business interests. They provide essential legal and administrative support, particularly for foreign-owned businesses needing to meet Singapore's director residency requirements. This role enables businesses of all types, especially holding companies, to concentrate on their strategic goals and global operations while remaining compliant with local corporate laws and regulations. Nominee directors thus play a crucial role in ensuring that businesses effectively balance their local compliance obligations with their broader global strategic objectives.
Norris is a well-rounded entrepreneur, investor, and advisor who has made significant contributions to algorithmic trading, digital marketing, and fintech industries. He successfully launched and sold his first venture, DigitalCibi, after gaining valuable experience in banking product development at HSBC. As one of the co-founders of Singapore's top business outsourcing firm, he offers expert accounting, company compliance, and consulting services to clients worldwide.