What is a Nominee Director in Singapore? Explained By Experts

If you've ever tried to incorporate a company in Singapore as a foreigner, you’ve likely come across a requirement to appoint a nominee director.

A nominee director is an essential role that is required in order to comply with local regulations and ensure your business is set up correctly.

This article will guide you through everything you need to know, from understanding the role of a nominee director to the eligibility requirements and, most importantly, how to find and appoint one for your company’s setup in Singapore. 

A nominee director is an individual appointed to meet incorporation requirements by representing a company on behalf of its foreign owners.

Unlike regular executive directors of the company, nominee directors usually don't have direct authority in managing the company or making decisions. Their key role is to be local resident directors for a Singapore company owned by a foreign business owner who doesn't have an Employment Pass, Entrepreneur Pass, or residency status in the country. 

According to the Companies Act 197, in order to legally register a company in Singapore, at least one director must be a Singapore citizen, permanent resident, or holder of an approved pass with a residential address in Singapore. There must also be at least one local director on the company’s board of directors at all times. 

If neither you nor your business partners are Singapore residents, you will need to appoint a nominee director to fulfil the requirement and comply with Singapore’s law. You cannot 

In addition to the legal requirements, appointing a local nominee director also benefits your company in the following ways:

1. Compliance With Singapore’s Laws: A local director helps your company understand and comply with the local legal and regulatory requirements, ensuring smooth operations within the Singaporean business environment.
2. Local Representation: A nominee director provides a local point of contact, which can be beneficial for dealing with Singaporean authorities or managing certain administrative tasks more efficiently.
3. Privacy and Confidentiality: For foreign owners who prefer to keep their names off certain public records, a nominee director offers a layer of privacy.

The role of a nominee director primarily revolves around regulatory and statutory compliance. While they may not be extensively involved in the day-to-day decision-making processes, nominee directors are crucial in ensuring that you adhere to the legal requirements set forth by the Accounting and Corporate Regulatory Authority (ACRA) and other relevant authorities.

In general, the responsibilities of a nominee director in Singapore include:

• Ensure Compliance with Singapore Law: The nominee director helps the foreign company meet regulatory requirements by acting as a local representative, ensuring the company adheres to Singapore’s legal obligations, including attending annual general meetings.
• Fulfilling Residency Requirements: A nominee director is appointed to satisfy the legal requirement for a local resident director, which is mandatory for company incorporation in Singapore. 
• Fiduciary Duty: While nominee directors are primarily appointed to fulfil the legal residency requirement, they are also expected to act in the best interests of the company and its shareholders.

Another critical aspect of a nominee director's role is the adept handling of potential conflicts of interest. Despite their non-executive role, nominee directors are expected to commit to the company's best interests, avoiding any personal gain that might conflict with its objectives. This commitment aligns with broader principles of corporate governance and regulatory compliance.

Nominee Director vs Nominee Shareholder

Nominee directors and nominee shareholders are different, so don’t confuse the two. A nominee shareholder holds shares on behalf of the actual owner but does not have any real ownership rights. This practice is often employed to maintain privacy and confidentiality.

Nominee directors typically interact with the board of directors, which is the governing body responsible for overseeing the company's operations. While nominee directors may not engage in daily decision-making on behalf of the company or hold full responsibility for regular director duties, they are essential to the board for compliance with the Singapore Companies Act.

Before appointing and assigning a nominee director, verify that they satisfy the eligibility criteria set by the government. A nominee director must be:

1. A Singapore citizen, permanent resident of Singapore, EntrePass holder, or Employment Pass (EP) holder with a permanent address. 
2. At least 18 years old and of full legal capacity.
3. Have a clean criminal record and must not have been disqualified from acting as a director of a company.

After understanding the nominee director’s eligibility criteria and responsibilities, it is time to appoint one. Here are the steps to appoint a nominee director:

Start by picking a qualified individual to be a nominee director of your company. It could be someone you know well, a reliable business partner, or a professional company that offers nominee director services as long as they tick all the eligibility criteria. 

No matter your choice, it's crucial to conduct due diligence to ensure the nominee director is good at their job, dependable, has the right qualifications, and meets all the requirements. This way, you can feel at ease knowing you have a trusted and knowledgeable local director, especially when managing things from overseas.

Once you’ve found the right candidate, the next step is to draft a Nominee Director Service Agreement. This document should clearly lay out the roles, responsibilities, and limitations of their powers and should cover the following:

• The terms of the arrangement between the company and the nominee director.
• The nominee director’s obligations.
• The extent of the responsibilities of the nominee director, such as not having any operational or management role.
• The restriction of the nominee director’s authority.
• The preferred method of dispute resolution.

Before signing the agreement, it's essential to review it thoroughly. This step is important because it provides legal protection for the nominee director and the client, defines the roles and responsibilities, and ensures compliance with regulations. Taking the time to review the agreement ensures that both parties are on the same page and helps prevent potential issues in the future.

After appointing the nominee director and executing the agreement, the final step is to submit the incorporation documents to ACRA. To do so, ensure that you have:

1. Identification document and proof of address of the nominee director; and
2. Board Resolution by way of written means to appoint the nominee director. 

Additionally, companies are required to maintain a Register of Nominee Directors at their registered office or the office of their filing agent. This register records the details of any director acting on behalf of a nominator (another person or entity) and must be made available to ACRA upon request. 

The easiest way to find a suitable nominee director is to use a company incorporation service or a corporate service provider that also handles other parts of the incorporation process for you. 

Many businesses, especially foreign companies, engage the services of incorporation service providers. These providers often offer nominee director services as part of their comprehensive package. These providers not only help you appoint a nominee director but also assist with other essential tasks, such as preparing incorporation documents, ensuring compliance with local laws, and handling ongoing administrative needs, saving you both time and cost.

While having a local director in Singapore can bring advantages to your company, it's crucial to be aware of potential risks. These risks include:

1. Legal and Regulatory Risks: If the nominee director fails to meet regulatory requirements or engages in misconduct, the company may face penalties, fines, or legal consequences, even if the nominee director was acting independently.
2. Reputational Risks: Any legal issues, misconduct, or conflicts of interest involving the nominee director may reflect poorly on the company and damage its credibility with clients, partners, stakeholders, and authorities. Likewise, the company’s actions can impact the nominee director’s reputation.
3. Financial Risks: Appointing a nominee director can lead to additional costs, including service fees and compliance-related expenses.
4. Accountability Risks: The nominee director’s name on official company documents makes them legally accountable for the company’s actions, putting them at risk of legal consequences if the company engages in illegal activities.

Before appointing a nominee director, carefully weigh these risks. Conducting a thorough background check and choosing a reliable nominee director familiar with Singapore’s Companies Act and local laws can greatly reduce these risks. 

Clear communication between the company and the nominee director also ensures the nominee director fulfils their duties effectively. This proactive approach is key to mitigating potential challenges and fostering a successful partnership.

When replacing or removing a nominee director, you can follow the steps outlined in the company’s constitution, shareholders agreement, or other legal documents. This process may involve submitting a resignation letter or filing a notification of cessation of agreement. 

However, it’s important to remember that a Singapore company must always have at least one local director on the board. 

According to ACRA, any changes in the particulars of company officers, including nominee directors, must be updated in BizFile+ within 14 days from the date of the change, and a penalty fee may be imposed for late filing. 

Crucially, when replacing or removing a nominee director, securing a suitable replacement is important before the current one steps down or is removed. Failing to do so could lead to non-compliance with local laws and potential legal repercussions. Opting for professional nominee director services during this transition ensures that the process is carried out accurately and in accordance with local laws and regulations. 

Appointing a nominee director in Singapore enables you to meet the essential regulatory requirements. Although they have non-executive roles, nominee directors are vital in maintaining compliance with regulations. By choosing the right nominee director, you can establish a strong foundation in the Asia Pacific region and position your company for growth. 

For a seamless Singapore company incorporation process, Statrys provides an all-inclusive package, covering everything from a nominee director (annual renewal) to company secretary services and registered address in Singapore, so you can focus on launching or expanding your business with peace of mind.