Need For Nominee Director in Singapore: Roles & Responsibilities Explained

A Nominee Director in Singapore is a foreign director who can be hired if the resident director is not available. Let's understand the roles and responsibilities which are executed by the nominee director in Singapore company.

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need for nominee director in singapore

Need For Nominee Director in Singapore

A resident director must be registered on the company’s board to become incorporated in Singapore. A resident director can simply be someone who is a Singaporean citizen, Permanent Resident, or EP Holder and has a local address.

It is possible that foreign companies who want to incorporate a Singapore firm may not have immediate access to a resident director. A Nominee Director is a foreign director who can be hired if the resident director is not available.

This article will be going to discuss:-

  • What is a Singapore Nominee Director?
  • Nominee director role
  • What they can do in the company
  • Nominee directors vs executive directors
  • When do you need the services of a nominee director?

What is a Nominee Director?

For foreign entrepreneurs, it is possible that they do not have Singapore residents, permanent residents, or EP holders as part of their management roster at the time of company incorporation. Piloto Asia, a corporate service provider, offers nominee directors.

This is a legal service that is mandated by Section IXA in Singapore’s Companies Act. The title “nominee”, which refers to the director’s role in companies, indicates that it is non-executive and does not serve to fulfill legal and regulatory requirements in Singapore.

The nominee directors aren’t involved in business operations and don’t participate. Even though it is a non-executive position, nominee directors must still adhere to their general duties to ensure that the companies they work with comply with Singapore laws.

The legal responsibility for potential risks is shared by the nominee director. The best way to mitigate this risk is for corporate service providers to take appropriate insurances like Directors & Officers Insurance Obligations (or Deed of Indemnity).

Why is it necessary to appoint a nominee Director in Singapore?

More foreigners are arriving in Singapore to establish their businesses and invest in Singapore. These foreign-owned companies could break laws, abandon businesses, and flee Singapore. 

Avoiding paying taxes, making illegal payments, and stealing money from customers or partners are all examples of common business crimes. These risks force the Singapore government into better governance of foreign-owned companies. 

The nominee-director requirement has been incorporated into the Singapore government’s policy. These directors will ensure compliance with local laws by overseeing and supervising local companies established by foreigners.

Nominee directors can guarantee the fulfillment of these duties. Nominated directors are responsible for the liabilities of the companies in which they work. Nominee directors may face criminal prosecution for any wrongdoings. 

Nominee directors will make every effort to avoid this risk. Nominee directors will review your company’s annual reports before they are sent out to the relevant governmental agencies.

Role of the Nominee Director and Responsibilities

These are the principal duties and responsibilities of a nominee Director:

  • Represent the company you are working with by acting in good faith
  • Avoid conflict between personal interests and the company’s interests
  • Signature of routine notices
  • Approval for annual audited financial accounts
  • Convening an annual general conference
  • Execution (if required) of an annual return

However, a Singapore Nominee Director is not.

  • Interfere in or make any business decision for the company
  • Not able to make it to the office, but you will need to be there to negotiate.
  • Take part in company meetings

Both the Principal Company (hiring firm) and Nominee Directors agree that the Nominee Director performs services in a nominated capacity. The Nominee Director is not able to exercise any EXECUTIVE or commercial responsibility.

Anytime, a Nominee director may request read-only access to the client’s corporate bank account. This is not to fulfill their fiduciary obligations and to aid in regular accounting and tax filing. However, the Principal Company may approve or deny such access without fear of being penalized by ACRA (or any other government agency).

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    Difference between Nominee Director & Regular Director

    For a comparison of a Nominee Director to a director, see the table below:

    Comparison Table between Regular Director and Nominee director Nominee Director Regular Director
    Responsible for managing the company's affairs? No Yes
    Comply with the legal obligations imposed by the Companies Act on Directors Yes Yes
    Do you want to sign as a bank signatory? No Yes
    Access to bank statements and financial records? No Yes
    Does the company have a fiduciary responsibility? Yes Yes
    Are you a shareholder or owner of shares? No Yes

    Singapore residents must have at minimum one resident director for companies that are registered here. This can be a Singapore citizen, Permanent Resident, or Employment pass holder. 

    Companies from foreign countries that do not have access to a resident Director must use corporate service providers to find a nominee director. For a fee, the foreign and new company must pay this Nominee director.

    A Nominee Director & a formal director (who can both be part of the board or play a role as a company director) share the same obligations and responsibilities as the former under the Companies Act and Common Law.

    The Board of Directors have the power to control the company and is answerable to its shareholders. The nominee director does not have any executive authority or say in the management of the company. 

    Professionally managed Nominee Director’s services include a separate “Nominee Director Arrangement”, which outlines the rights and responsibilities of the Nominee and Client to protect their interests.

    Who is a nominee director in Singapore?

    Nominee directors are employed to comply with Singapore’s incorporation requirements. 

    This is:

    • At least one director should be a Singaporean resident

    This means that a nominee director must be:

    • Singapore citizen, Permanent Resident, EP holder, with a permanent Singapore address
    • You must be at least 18 years old

    The Singapore Companies Act prohibits nominee directors from being:

    • An undischarged bankrupt. Legally, they are bankrupt. However, they must still pay off certain debts. They cannot borrow again from financial institutions.
    • A conviction for any offence that involves fraud or dishonesty carries a maximum term of three months imprisonment
    • Convicted by the court for three or more ACRA filing offences
    • Participated with at least three companies that ACRA struck off within five year.
    • Companies disqualified from winding up for national security or interest
    • Insolvent Companies: Disqualified as Directors Unfit for the Job
    • For failure to make returns, you will be disqualified

    Why would you choose to use a nominee in Singapore?

    A nominee director service is a convenient option for small business owners in Singapore. A majority of service providers include a nomination service in their incorporation packages.

    It is no longer necessary to search for another service provider to find a local-resident director. A one-time fee is all that is required to complete full incorporation. A few service providers may not require any deposit from nominee directors in Singapore. The service fee is all you need to pay.

    ODINT Consulting allows you to easily locate a nominee director included in our Singapore incorporation package. As long as we are appointed as your secretary, we don’t take any deposit for this nominee service.

    A separate agreement may be required to hire a nominee director. You may allow a nominee director to use the significant power granted to a director to take control of your company’s shares and business. 

    A trusted service provider can help you hire a nominee Director to avoid this. The service provider will not only be able to appoint you a professional local director, but they will also have to sign a formal agreement. The agreement will typically limit the nominee director’s responsibilities in the company.

    The nominee director will not visit your office and take part in the management of your business. In practice, he will only help you meet the incorporation requirements. To make sure your company is not doing anything suspicious, he will inspect all reports before the papers are submitted.

    What Is the Difference between a Nominee Director & a Nominee Shareholder

    A nominee director acts on behalf of the company owner as a director. A nominee shareholder is a person that “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).

    Are You able to replace the Nominee Director of your Company in Singapore?

    Yes, you can. You can’t operate your business in Singapore without one. It is essential that you have at least one local director and one nominee director.

    If you are unhappy with the current nominee director, you have the option to:

    • Other corporate service providers may offer to hire a second nominee director
    • You will need to find a Singapore citizen, PR, EP, or EP holder who can act as your resident Director.

    Although you can act as sole director, an EP must be obtained for your company. You might also be able to get assistance from CSPs regarding immigration. The Employment Pass allows you to hire yourself as a director for the company you have incorporated in Singapore. 

    Once you are approved, your move and relocation to Singapore will be permitted. You will be considered a local-resident Director, which means that your company won’t require the services of a nominee director.

    However, the process of obtaining an Employment Pass may take several months. Your company will still need to meet with a nominee Director to fulfil incorporation requirements in Singapore until the EP is available to you.

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      Conclusion

      You can meet incorporation requirements by having a nominee director in Singapore. This is because your company must have an individual who lives in Singapore.

      Nearly all incorporation service providers include a nomination director service as part of their package. You may feel more secure using a nominee service because the directors are professionally hired and come with valid contracts.

      Singapore-based companies must maintain a register of their nominee directors that includes details of the nominator.

      If you’re intending to have a Nominee Director in your Singapore firm or even you want to know more about the procedure, don’t hesitate to get in touch with us. We are Odint Consultancy of highly experienced professionals who are ready to help you with all of your trading requirements.

      FAQ’s

      It is common for corporate service providers to ask for a security deposit. Director nominees can be responsible for any additional costs, such as insurance for indemnity or fees for late or incorrect reporting

      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.

      ACRA defines a nominee directory as an individual who is legally bound to comply with the wishes, directions or directives of another.

      The nominee director won’t visit your office, can’t take part in any policy meetings and will not engage with the company in negotiations. This nominee director is a figurehead appointed to meet Singapore’s requirements.

      Nominee directors will be hired to comply with Singapore law. They must be citizens or permanent residents of Singapore with a permanent Singapore address.

      A nominee director to a JV Company Board will need to exercise independent judgment and not only take into consideration the views and interests of his shareholder.

      To ensure that the financial institution’s interests are properly protected, a nominee director is appointed. A nominee director is also designated to serve the obligation towards the borrower and its stakeholders.

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