Nominee Director in Singapore: A Complete Guide for Companies (2024)
Looking for options other than a local/resident director for your Singapore company? Well, look no further. In this guide, we will go over the alternative choice of nominee director, what their role is, how to appoint one, and much more! Get started with our guide today.
If you are looking to register a local company in Singapore, whether local or offshore, you must follow the requirements established by Singapore’s Companies Act. Amongst the various obligations companies must adhere to, there is often a point of confusion or concern for business owners: appointing a resident director.
A resident director has to be on the company’s board at all times and can be either a Singapore citizen, permanent resident, or work pass (e.g. Employment Pass, EntrePass) holder. However, it is often difficult for companies to find a person living in Singapore that can act as a resident director, especially for offshore companies with primary operations in another country. So, what’s the solution?
Please read our guide 3 ways of appointing local director. In this article, we discuss the Nominee Director arrangements only.
Many companies are using Nominee Director services, for the purpose of incorporation and compliance with Singapore regulations.
What Is a Nominee Director?
Generally, a nominee director is a member of the board of directors of the company without executive power. In other words, such a director cannot make business-related decisions. At the same time, nominee directors can represent other decision-makers who are not formally officers of the company, and, for example, vote or sign documents on their behalf, among other duties. The relationships between the company, its owners, and nominee directors are usually regulated by internal agreements, which clearly determine what local nominee directors should and shouldn’t do. While some countries do not recognize nominee director arrangements as a valid legal concept, countries with a common law-based system, including Singapore, do.
For the purpose of incorporating a private company in Singapore, there must be at least one director who is a legal resident in Singapore. As the term implies, such residents are citizens, permanent residents, or long work pass holders – such as Employment Pass or EntrePass holders. Such directors are also commonly referred to as local directors.
When a new company comes is established as a result of a joint business venture between foreign and Singaporean founders, they will most likely have somebody from the team to act as a local director in Singapore. However, when the company is set up in Singapore from abroad and does not have any local presence, there will likely be a need for a local nominee director arrangement.
ACRA defines that “a person appointed as a director of a company for the purpose of compliance with the requirement that every company registered in Singapore must have at least one director who is ordinarily a resident in Singapore would generally fall within the definition of a director who is a nominee.”
What Are the Responsibilities of a Nominee Director in Singapore?
All directors of Singapore companies are expected to act in the best interests of the company they are appointed with. While a nominee director is not involved in the company’s operating activities (e.g., incorporation matters, company negotiations, bank account opening), he or she still has the same responsibilities that a resident director would otherwise have, and has to follow the required duties to ensure that the company at hand remains compliant with Singapore law. Thus, a nominee director is primarily needed because it allows the Singapore government to have a legally liable individual in case a company breaks the law, meaning that a nominee director takes significant risks on behalf of your company.
In practice, this means that the local nominee director should exercise reasonable due diligence in order to ensure that the company is not involved in any illegal activities and that it complies with the main legal requirements, including holding an annual general meeting (AGM) on time, maintaining its registers (registers of nominee directors, shareholders, etc.), and conducting timely filings of annual returns.
During the normal course of operations, most if not all of these duties would be performed by the other active directors or secretaries of the company. However, in case of disruption of business, the nominee director might be involved in the matters of the company in order to be compliant with Singapore law. For example, if foreign owners and directors become uncontactable and fail to run the business properly, the nominee director might end up with the company in hand and may have to take steps to close it down, via striking off procedure or voluntary dissolution.
How to Appoint a Nominee Director in Singapore?
Generally, there are two simple steps you can take to appoint someone as nominee director in Singapore:
Step 1: Find a Fitting Candidate
It is important to note that a local director must be a person who meets the following requirements:
- Trustworthiness and Integrity: As the nominee director is officially registered with the authorities and has certain responsibilities related to the company, they must be trustworthy and have a good reputation.
- Understanding of Director’s Duties: While the nominee director may not actively participate in the company’s management, they should be aware of their legal duties as a director under Singapore’s Companies Act. These duties include acting in good faith, exercising due care, and avoiding conflicts of interest.
- Compliance Awareness: The nominee director should be familiar with the regulatory and compliance requirements for companies in Singapore. This includes keeping track of filing deadlines, financial reporting obligations, and other legal requirements.
- Communication Skills: It’s essential for the nominee director to be able to communicate effectively, especially if they need to liaise with other directors or stakeholders on behalf of the company.
- Availability: The nominee director should be available when needed to fulfill their duties, which may include attending board meetings, signing important documents, and being reachable for official matters.
- Confidentiality: The nominee director must maintain confidentiality regarding the affairs of the company and any sensitive information they may come across in their capacity as a director.
- Understanding of the Company’s Business Activities: While not actively involved in management decisions, it is beneficial for the nominee director to have a basic understanding of the company’s activities and industry.
- Ability to Act in Emergency Situations: In the case of emergencies or unforeseen circumstances, the nominee director should be able to act in the best interest of the company and its shareholders.
If your company is unable to fill the role of resident director, it can hire a nominee director through a corporate service provider. Thus, the first step is to choose a provider with a nominee service that can adjust to your company’s unique financial and legal circumstances.
At Intracorp, our nominee directors have years of professional experience working in this capacity. Contact us today to get matched with your ideal nominee director.
It’s important to note that while a nominee director serves a specific legal purpose, it’s necessary for the company to have its actual directors actively involved in the management and decision-making processes. The use of nominee directors should be carefully considered and compliant with local laws and regulations. Additionally, nominee directors often require a formal agreement or contract defining their roles and responsibilities to avoid any misunderstandings or conflicts.
Step 2: Sign the Nominee Director Agreement
Once you have selected a nominee director provider, you can begin the official appointing process by signing a formal agreement with the designated nominee director. This agreement will protect your company as well as the nominee director because it will clearly establish expectations, responsibilities, and limitations of the role.
But, in order for the agreement to provide this legal safety net, it must address the following points:
- The terms of the agreement with the nominee director
- The powers and responsibilities of the nominee director
- That the nominee director does not implicitly have a management or operational role in the company
- That the nominee director cannot make any personal guarantees or decisions for the companies
- The preferred dispute resolution approach
- Additional details or preferences
Once both parties have signed the agreement, you have officially appointed a nominee director.
Wrap Up
Appointing a nominee director in Singapore is a crucial step for companies operating within the country and for offshore companies, ensuring that your company remains compliant with local regulations. Now that you understand the responsibilities of a nominee director and the necessary steps to appoint one, you can get started with a hassle-free process.
Read our related guides to find out more about Singapore’s compliance requirements for companies!
