What is a Nominee Director?

Many clients have asked us, ‘What is a Nominee Director and what does he or she do exactly? Do they have any legal rights over the company?’. In this article, we will answer this question in detail.

Why do I need a Nominee Director (ND)?

To answer this, we need to look at the definition from the Accounting and Corporate Regulatory Authority (ACRA). ACRA defines a nominee director as ‘someone who is responsible to act in accordance with the directions, instructions or wishes of another person.’ Of course, this obligation may come in the form of legal obligations (e.g. trust or contract) or other written or verbal agreements.

Further, the Singapore Companies Act defines that ‘a director is a nominee if the director is accustomed or under an obligation whether formal or informal to act in accordance with the directions, instructions or wishes of any other person.’

If you are a foreigner wishing to incorporate a company in Singapore, this is an essential criterion that you must fulfill, to get a qualified individual to act as a director, who resides in Singapore. A nominee director is essentially the ‘face’ of your company.

Fiduciary duties

Many foreign clients ask us questions such as what if the ND sells the company away, or takes out loans in the name of the company? As a representative of the company, he or she has the authority to do just about anything in the company. However, under the strict Singapore laws, the NDs owe a duty of care towards the company and are bound to these elements:

• Act in good faith and all honesty and in the company’s best interest
  • When it comes to any form of decision-making, the ND must put aside all personal and third parties’ interests, and only act to serve the best interest of the company.
• Avoid any conflicts of interest
  • The ND must stay clear of any situations which will potentially put him in a position of acting against the best interest of the company. Examples are revealing sensitive information of the company to a competitor who is a known person to the ND. Or inciting someone else to start a new company to compete for business with the current company.
• Exercise professionalism with care and diligence
  • The ND must always display professionalism at all times, and with a sound character and integrity.
• Never abuse power or authority
  • The ND should only use the authority to advance the company’s interests, instead of advancing his or her own personal interests.

Nominee Director’s statutory duties

1. To convene Annual General Meeting (AGM) and file Annual Returns (AR) with ACRA. For more information on how to convene an AGM or what are the requirements, click here. For the filing of AR, you can read more here.
2. To maintain the Statutory Registers regularly. They are namely the Register of Directors, Register of Charges, Register of Members, Register of Directors Shareholdings. And of course the company’s accounts.
3. To maintain a local business address. That means this must be a physical place and not a mere mailing address (such as PO Box). The ND needs to notify ACRA if there is a change of registered address, not more than 14 days.
4. Keep proper records of all minutes and resolutions of the company. Any changes or amendments with regards to the company must be properly documented and lodged with ACRA.
5. The ND must disclose to ACRA if there is any update to the Register of Directors Shareholdings which include shares, rights, options, or contracts.

Liabilities

Under the Singapore Companies Act, failure to exercise his or her duties as an ND can result in civil lawsuits or may even be a criminal offence. The consequences can involve either a fine imposed, or imprisonment, or both.

Conclusion

The duties of an ND are not to be taken lightly. It can result in very serious consequences if the person is guilty of acting in bad faith towards the company. So it is very important that you choose an ND that is reliable, responsible, and also responsive.

The ND needs to submit certain documents to the authorities on behalf of the company, especially when you as a shareholder or director are physically based overseas. The ND is bound by his contractual obligations to do all these tasks. That is why here at SG Company Services, we provide a panel of qualified and reliable NDs who are working professionals.

If you have more questions on how an ND functions, feel free to contact us today!

Download the Telegram app and follow us for the latest updates: https://t.me/sgcompanyservices