What is a Nominee Director and Why is It Crucial For Your Business

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Incorporating a business in Singapore is one of the smartest investment decisions you can take. The country has grown into one of the major economic hubs in Asia and across the world. Many MNCs have set up shop in Singapore for many reasons. For a start, the statutory requirements are more relaxed and straightforward.

The country continues to rank top in the World Bank’s Ease of Doing Business Index. What’s more, the country’s corporate tax regime is among the most favourable worldwide. What’s more, there’s highly skilled labour, developed infrastructure, among other things, that make this a viable investment destination.  

When registering your foreign-owned business in the country, one of the statutory requirements is a nominee director (ND). This is one of the least understood regulations of the country’s Companies Act.

 If you plan to incorporate your company in the country, this post explains everything you need to know about nominee directors to help you comply with the country’s Company Act.

What’s a Nominee Director?

In Singapore, which has emerged as a top business destination, your company requires a director who’s a country resident during the business registration. You must meet this requirement when applying for registration through the Accounting & Corporate Regulatory Authority (ACRA).

The government requires a person to take responsibility for your company’s affairs. If you are a foreigner, you might not be in the country to answer any issues that arise. A resident director has to take due diligence in any decisions made because they’re also liable.

In most cases, foreign-owned businesses don’t have any locals in their ownership structures, which is where a nominee director comes in handy. This is a citizen or a permanent resident of Singapore hired to act as a director of the company to fulfil the regulatory requirements.

This director acts on behalf and in accordance with the wishes of the appointing entity. They are agents/representatives of the company during its operations in Singapore.

The alternative for registering your company without an ND would be to relocate to the country and become a resident with a permanent address. After gaining residency, you can apply for an Employment Pass or an Entrepreneur Pass.

However, this can only work if you settle fully in the country and in most cases, this is not possible. What’s more, this requires a lot of time which is a luxury you don’t have when you want to invest. This is why nominee directors have become a crucial part of company incorporation in the country.

Roles and Responsibilities of a Nominee Director

Before you appoint a nominee director for your company in Singapore, start by understanding their role. The role of the ND includes:

  1. Acting on behalf of your company
  2. Acting in a manner that avoids conflict of interest such as during purchases, starting a rival firm, or divulging company information
  3. Professionalism in managing the company
  4. Using their powers, rights and privileges to help your company and not prejudice or harm it.
  5. Playing some crucial roles in the absence of a local resident director
  6. Helping with logistical issues when registering and formalizing the business

Is there a Risk in Hiring a Nominee Director?

When hiring a nominee director in Singapore, it’s important to appreciate that the law doesn’t distinguish between a regular director and the nominee director. Directors have the power under the Company Act to make critical decisions and this is why you need to hire the right person/entity for this position.

When you have a resident director and you don’t have other structures within your company, there’s a risk of mismanagement. The director can make strategic decisions on operations and management. What’s more, they can act on behalf of the company with the government, clients, and suppliers without the consent of the appointing authority or shareholders.

Why Use Company Registration Services

These risks necessitate the use of reputable Singapore company registration services to lead the company’s affairs in your absence. Working with a corporate body ensures you get a qualified director who appreciates the role. This is a professional who performs their role with utmost honesty and integrity.

The registration service also limits your nominee director’s powers through an internal agreement that protects your company’s interests. In most cases, business registration services in Singapore require you to appoint an executive director who will run and manage your company’s affairs.

In essence, ND’s role is only to help your business meet the regulatory requirements. This prevents problems that commonly arise along the way for foreign-based companies that don’t carry out due diligence when appointing a resident director.  

Wrapping Up

Singapore is one of the best destinations for investment. If you want to incorporate your business here, you need a nominee director. You shouldn’t risk your investment by appointing just any other person. Working with a business registration service ensures a smooth registration process and helps you find the right nominee director. Your ND will work under a service agreement, and this protects your business against any harm.

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