What is a Nominee Director and how to appoint one for your Singapore Company?

 

According to Section 145(1) of the Companies Act, there needs to be at least one resident director in a company.

Section 145(1) of the Companies Act: Every company must have at least one director who is ordinarily resident in Singapore and, where the company only has one member, that sole director may also be the sole member of the company.

This is a statutory requirement. Foreign-owned companies may find this initially difficult to fulfil. The stakeholders are all out of Singapore but yet they need to have a local presence to fulfil this requirement. The foreign stakeholders may eventually successfully apply for a valid work pass to live and work in Singapore but for the time being, they will need someone to fulfil this statutory requirement. Therefore, they may decide to engage a local nominee director.

Another reason for someone to engage a local nominee director is if the company that he intends to set up is in conflict with his current employment. Therefore, till he leaves his current employment, he will not be able to act as the director of his company. An example of this would be an employee of an insurance brokerage wanting to set up his own insurance brokerage. His current terms of employment may prohibit him from setting up his own company that would compete with his principal. However, he needs to set up his own company to apply for certain licences and other company set-up-related matters like signing the lease agreement for the office. In such a case, he may opt to engage the services of a nominee director so that the company can be set up before he leaves his current employment.

So what is a Nominee Director?

A Nominee Director is an individual who is appointed by stakeholders of the company to represent another individual and/or to provide a local presence if the stakeholders are foreign.

A Nominee Director is NOT an executive. Therefore, this person, although he should know about the company’s affairs, should not be involved in the day to day running of the company. His role is merely to fulfil the statutory requirement. If this individual is involved in the day-to-day running of the company, then he cannot be deemed to be a Nominee Director.

How do you identify qualified individuals who may be appointed as Nominee Directors?

The company needs to work closely with the Nominee Director. Therefore, the primary consideration is that the Nominee Director should be someone who is easy to work with. He should be someone who is responsive to both the stakeholders as well as to regulators. Additional considerations when appointing a Nominee Director are that the Nominee Director should not be involved in any legal suit and should have good financial standing.

How to hire a Nominee Director?

You can engage corporate service providers like Raffles Corporate Services to assist you in appointing a Nominee Director. Once you have gotten an appropriate candidate, the next step would be to execute a Nominee Director Appointment Agreement. This agreement would spell out the terms and conditions of the appointment as well as state the limitations in terms of the powers that the Nominee Director can have. It should also state the period of appointment as well as a termination clause to end the appointment.

Once all this is settled, the company must comply with the statutory requirements as well as the Company Constitution in the manner of appointment. The registrar should be informed of the appointment and the relevant shareholder resolutions and updating of the company information should be done to formally include this individual as a director of the company. Under the business profile, there is no appointment for “nominee director”. There is only “director”.

How to maintain good relations with your Nominee Director?

While a Nominee Director is not an executive who is responsible for the day-to-day running of the company, the stakeholders of the company should still inform the Nominee Director of the major dealings of the company. The Nominee Director should also have access to company records like bank statements and the company’s accounts. Updating the Nominee Director of the major decisions of the company is also a good practice.

In most cases, the Nominee Director would request that a refundable security deposit be placed with the corporate service provider. If the company is involved in any lawsuit and the stakeholders of the company are unresponsive, the Nominee Director can draw on this deposit to engage legal representation for that particular lawsuit.

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