Expanding your business to Singapore? If you’re a foreign entrepreneur, you might have already hit a roadblock—Singapore requires at least one local director to register a company. This is where a nominee director comes in.
A nominee director in Singapore is a Singapore resident appointed to meet regulatory requirements, ensuring your company stays compliant with the Singapore Companies Act. However, they don’t participate in business operations or decision-making. Instead, they serve as a legal representative while you maintain full control of your company.
While a nominee director can help foreign businesses navigate legal hurdles, it’s crucial to understand their responsibilities, potential risks, and how to protect your business interests.
In this guide, we’ll break down everything you need to know about appointing a nominee director in Singapore—how it works, what to watch out for, and how to ensure your company remains in safe hands.
What is a Nominee Director?
A nominee director is a person from a third party who represents your company without an executive director in the local area to carry out the corporate obligations in Singapore.
The word “Nominee” means that the director’s designation is not a position of executive power and is only to fulfill Singapore’s regulations and legal requirements. This means that the director’s role does not mean that they have direct charge of the company’s operations.
The main purpose of a nominee director is to provide a local presence for a company that is incorporated in a foreign jurisdiction.
For example, if a foreign company wants to set up a business in Singapore, it may be required to appoint a Singaporean nominee director who will act as the local representative of the company.
It is important to note that while the nominee director may be responsible for fulfilling certain statutory obligations, they do not have any real control over the company’s management or decision-making processes.
Need for a Nominee Director in Singapore
Singapore requires a local nominee director as part of its company incorporation process for foreign individuals or entities looking to set up a business in Singapore.
Here are some reasons why your company needs a nominee director in Singapore:
Comply with local laws
As mentioned, every Singapore firm should possess at minimum 1 regional director. Regulatory and legal impacts can occur if you fail to meet the compliance.
Establish a local presence
Having a nominee director who is familiar with the local business landscape can help your company establish a local presence and build relationships with local stakeholders.
Access to local expertise
A nominee director can provide valuable insight into the local market, culture, and regulations, helping your company navigate these unfamiliar territories.
Protect your privacy
By appointing a nominee director, your company can maintain confidentiality and privacy, as the nominee director’s name will appear on public records rather than your own.
Flexibility in managing your company
The nominee director can hold shares in the company on behalf of the foreign owner, giving the owner flexibility in managing the company without being physically present in Singapore.
Overall, appointing a nominee director can help your company navigate the legal and regulatory landscape in Singapore, establish a local presence, and access valuable local expertise.
Procedure to Appoint a Nominee Director in Singapore
Here is a step-by-step guide on how to appoint a nominee director in Singapore:
Step 1:- Identify a suitable nominee director
You can either appoint a trusted individual as your nominee director or engage a professional service provider who specializes in providing nominee director services.
Step 2:- Execute a Nominee Director Service Agreement
Once you have identified a nominee director, you will need to execute a Nominee Director Service Agreement, which outlines the terms and conditions of the appointment, including the nominee director’s duties, responsibilities, and liabilities.
Step 3:- Obtain the necessary documents
You will need to provide the nominee director with the necessary documents to facilitate the appointment, including a copy of your company’s Memorandum and Articles of Association, and any relevant corporate documents such as board resolutions and incorporation certificates.
Step 4:- Apply for the appointment of nominee director
You can apply for the appointment of a nominee director by submitting the necessary documents to the Accounting and Corporate Regulatory Authority (ACRA) of Singapore.
Step 5:- Verify the identity of the nominee director
As part of the appointment process, the nominee director will need to provide proof of their identity and residential address, which will be verified by ACRA.
Step 6:- Notify the nominee director
Once the appointment has been approved by ACRA, you will need to notify the nominee director and provide them with the necessary information to facilitate their role as a director of the company.
Step 7:- Fulfill statutory obligations
The nominee director will be responsible for fulfilling certain statutory obligations, such as filing annual returns, holding annual general meetings, and maintaining proper accounting records.
Under Singapore laws, OnDemand International will perform a KYC due diligence test of the prospective client before the start of our services.
Eligibility Criteria for Appointing a Nominee Director in Singapore
In Singapore, there are certain eligibility criteria that should be met in order to appoint a nominee director.
Here are the main requirements:
Should be a Singapore citizen or permanent resident
The nominee director should possess a local residence in Singapore and hold either citizenship or permanent residency.
Should not possess a criminal record
The nominee director should possess a clean criminal record and not be disqualified from holding any directorship positions.
Should possess a regional residential address
The nominee director should possess a regional residential address in Singapore, as this is mandated for official correspondence.
Should be at least 18+ years old
The nominee director should be 18 years old to be qualified for the position.
Should possess relevant experience and knowledge
The nominee director should have relevant business experience and knowledge of local regulations, as they will be responsible for ensuring that the company complies with all relevant laws.
OnDemand International will take care of all the due diligence to make sure all the criteria are met for the ideal nominee director in Singapore.
Roles & Responsibility of Singapore’s Nominee Director
The roles and responsibilities of a nominee director in Singapore include:
Compliance with local laws and regulations
The nominee director is responsible for ensuring that the firm operates in compliance with local laws and regulations. This includes filing annual returns, holding annual general meetings, and maintaining proper accounting records.
Providing a local address
The nominee director provides a local address for the company, which is required by law.
Representing the company
The nominee director represents the company in Singapore and may be required to sign documents on behalf of the company.
Maintaining proper records
The nominee director is responsible for maintaining proper records of the company’s transactions and ensuring that these records are kept up to date.
Acting in the best interests of the company
The nominee director has a fiduciary responsibility to operate in the finest goods of the firm and its shareholders.
Disclosing conflicts of interest
If the nominee director has a conflict of interest, they must disclose it to the board of directors and abstain from any decision-making relating to that conflict.
Reporting to the board of directors
The nominee director is required to report to the board of directors on the company’s operations and financial performance.
Liability for breach of duties
The nominee director can be held liable for breach of their duties as a director, including breaches of fiduciary duty, negligence, or fraud.
Risks of Appointing a Nominee Director in Singapore
While appointing a nominee director in Singapore can be an effective way for foreign companies to establish a local presence and comply with local laws and regulations, there are some risks involved.
Some of the potential risks of appointing a nominee director in Singapore include:
Legal and regulatory risks
The nominee director is responsible for ensuring that the company operates in compliance with local laws and regulations. If the company violates any laws or regulations, the nominee director may face legal and regulatory risks, including fines, penalties, or even imprisonment.
Reputational risks
If the company is involved in any unethical or illegal activities, the nominee director’s reputation may be affected, and they may face damage to their professional standing.
Financial risks
The nominee director may be held personally liable for any financial losses suffered by the company as a result of their negligence or breach of duty.
Conflict of interest risks
If the nominee director has a conflict of interest, such as having a personal or financial interest in a decision made by the company, they may face legal and reputational risks if they fail to disclose it.
Difficulty in managing relationships
In some cases, the relationship between the nominee director and the foreign company may become strained, particularly if there are disagreements over management decisions or issues relating to corporate governance.
It is important for foreign companies to carefully vet potential nominee directors and ensure that they have the necessary expertise and experience to fulfil their roles and responsibilities effectively.
Difference Between A Nominee Director And A Regular Director In Singapore
The difference between a Nominee Director and a Regular Director in Singapore is discussed below:
Criteria | Nominee Director | Regular Director |
Definition | A person appointed to meet the legal requirement of having at least one local director but does not manage daily business activities. | A director responsible for the overall management, strategic decisions, and operations of the company. |
Legal Requirement | Mandatory for foreign-owned companies to have at least one local director who is a Singapore resident. | Required for all Singapore companies and must meet statutory obligations. |
Control & Authority | Has no decision-making power; acts as a legal representative. | Actively participates in decision-making, management, and operations. |
Responsibilities | Mainly for compliance with statutory requirements and local regulations. | Responsible for company performance, governance, and strategic direction. |
Liabilities | Limited liability as they do not make business decisions. | Legally responsible for all company activities and compliance. |
Appointment | Appointed to fulfill legal residency requirements but does not interfere in company affairs. | Appointed by shareholders or board members to oversee and manage the company. |
Residency Requirement | Must be a Singapore citizen, PR, or hold an Employment Pass/EntrePass/Dependent Pass. | Can be a local or foreign individual, provided the company meets residency requirements. |
What Makes a Nominee Director Different from a Nominee Shareholder?
A nominee director acts on behalf of the company owner as a director. A nominee shareholder is a person who “lends their names” to you to allow you to become the registered owner of shares in a company. A nominee shareholder holds shares only for your benefit.
Nominated shareholders are appointed by companies to act as the shareowner. The arrangement remains secret. You retain all rights associated with holding shares. These include the right to vote at general meetings and to receive dividends.
It is possible for the nominee director to be the same person as the nominee shareholder. Let’s say that a nominee shareholder must be another person. These people are often close friends or relatives of the business owner, as well as other professionals such as accountants or lawyers.
Singapore does not have any laws against shareholder agreements with nominees as long as the following:
- Legal reasons prompted the arrangement.
- Public agencies such as the Accounting and Corporate Regulatory Authority of Singapore and the Inland Revenue Authority of Singapore (IRAS), record the identity and existence of beneficial owners (you and/or the business owner).
Is it possible to replace the Nominee Director of a Company in Singapore?
Yes, it is possible to replace a Nominee Director of a company in Singapore. The process typically involves the following steps:
Steps to Replace a Nominee Director in Singapore
1. Check the Service Agreement:
If the Nominee Director was appointed through a service provider, review the contract terms regarding resignation and replacement.
2. Appoint a New Nominee Director:
- The company must ensure that the new Nominee Director meets the residency requirements (must be a Singapore citizen, PR, or pass holder with a local address).
- The new nominee director must sign a Nominee Director Agreement to confirm their limited role.
3. Resignation of the Existing Nominee Director:
- The current nominee director submits a resignation letter to the company.
- The company should acknowledge the resignation and process the necessary changes.
4. Update the Company’s Records:
The company must update the Accounting and Corporate Regulatory Authority (ACRA) through BizFile+ within 14 days of the director’s resignation and replacement.
5. Update the Bank & Other Authorities (if needed):
If the Nominee Director was listed in bank accounts or other official documents, these need to be updated.
Key Considerations:
- The company must always have at least one local resident director at all times to comply with the Companies Act.
- If the nominee director was acting under a service agreement, the provider may require prior notice before replacing them.
- If the company fails to appoint a new nominee director, it could face non-compliance penalties from ACRA.
How OnDemand International Can Help?
OnDemand International offers Nominee Director services in Singapore to help foreign entrepreneurs meet regulatory requirements. If you need to replace your current Nominee Director or appoint a second Nominee Director for added compliance and security, OnDemand International can assist with a smooth transition.
Conclusion
As Singapore continues to attract entrepreneurs and corporations from around the world, the role of nominee directors will remain essential in facilitating international business transactions and promoting economic growth.
By understanding the responsibilities and obligations of a nominee director, foreign entities can successfully navigate the complexities of setting up a business in Singapore and thrive in one of the most dynamic and prosperous business environments in the world.
However, the role of a nominee director should not be taken lightly, that’s why it is advisable to seek the assistance of professional experts from OnDemand International to help you appoint a nominee director in Singapore.
FAQ’s
Foreign companies appoint nominee directors in Singapore to comply with the local law that requires every Singapore company to possess a minimum of 1 regional director.
Companies are often forced to replace their Nominee Director because they are no longer cooperative with clients or not accessible. We as corporate service providers must communicate clearly with our clients and explain to them the responsibilities and scopes of nominee directors.
Nominee directors will be hired to comply with Singapore law. They must be 18+ citizens or permanent residents of Singapore with a permanent Singapore address.
Yes, if a nominated director is discovered to have participated in fraudulent activity, broke their fiduciary obligations, or acted carelessly, they may be held accountable for the foreign company’s actions.
Foreign companies can protect themselves when appointing a nominee director in Singapore by conducting thorough due diligence, ensuring that the nominee director has the necessary experience and expertise, having appropriate insurance coverage, and regularly reviewing the nominee director’s performance.
Yes, a nominee director can be removed from their position by the foreign company that appointed them.
