How to Appoint a Nominee Director for Your New Company in Singapore

When it comes to company registration in Singapore, the significance of a nominee director (ND) cannot be overstated, particularly for foreign entrepreneurs. But why is a nominee director so essential? Well, it all stems from the strict mandates laid out by the Accounting & Corporate Regulatory Authority (ACRA), which dictate that every company operating in Singapore must have a local resident director.

What is a Nominee Director?

A nominee director, also known as a local director, is an individual appointed to act as the director of a company on behalf of its owner or entity, primarily to fulfill legal and regulatory obligations outlined in the Singapore Companies Act. Nominee directors typically have no involvement in the day-to-day operations of the company.

Why Do You Need a Nominee Director?

Having a nominee director in Singapore is essential for several reasons:

1. Legal Requirement: The Accounting and Corporate Regulatory Authority (ACRA) mandates that a Singapore company must have at least one resident director or a nominee director for registration.
2. Compliance and Guidance: Nominee directors possess local knowledge and expertise necessary to ensure your business complies with Singapore’s laws and regulations, especially if you are operating in a foreign country for the first time.

The Role of a Nominee Director

A nominee director’s primary duty is to act in the best interests of the company and ensure compliance with Singaporean laws. Some responsibilities of nominee directors in Singapore include:

• Convening annual general meetings.
• Signing routine documents such as tax forms and bank resolutions.
• Ensuring timely regulatory filings (e.g., tax returns).
• Maintaining accurate accounting records.

However, nominee directors do not have the power to attend meetings, vote at meetings, or be the authorised signatory for the company’s bank accounts. They must always follow the instructions of their nominator (typically the business owner).

Who Can Be a Nominee Director in Singapore?

According to the Companies Act, a nominee director in Singapore must:

• Be a Singapore citizen, a Singapore Permanent Resident, or hold an Employment Pass (EP). EP holders can only be appointed as nominee directors after the company’s incorporation.
• Have a permanent address in Singapore.
• Be at least 18 years old.

Certain individuals are disqualified from becoming nominee directors, including undischarged bankrupts, individuals convicted of certain crimes, and those disqualified due to company winding-up or insolvency-related issues.

When Do You Need a Nominee Director?

You may require a nominee director in Singapore in the following situations:

1. Foreign Entity: If you are a foreign entity looking to establish or expand your business in Singapore and lack a local director, a nominee director becomes essential.
2. Privacy and Tax Considerations: The business owner may prefer not to be publicly registered as a director due to privacy or tax concerns.

How to Find a Nominee Director in Singapore

To appoint a nominee director, consider these options:

1. Local Contacts: You can appoint a business associate or an employee residing in Singapore, provided they meet ACRA’s nominee director requirements.
2. Corporate Services Provider: If you do not have suitable local contacts, many corporate services or company registration services specialise in providing nominee director services. Ensure you choose a reputable firm.

Risks of Hiring a Nominee Director in Singapore

While nominee directors have a non-executive role, they still bear legal responsibility for any breaches of the law by the company. It is crucial to appoint an individual with knowledge and experience in fulfilling their duties to minimise risks. Both the company and the nominee director can face legal consequences for non-compliance.

Appointing a Nominee Director

Outsourcing a nominee director requires a well-structured agreement to protect the interests of both parties. Here’s how to do it:

1. Nominee Director Agreement: Create a formal written agreement that details the responsibilities and powers of the nominee director. Ensure clarity regarding their non-executive role and their obligation to follow your instructions.
2. Dispute Resolution: Specify a preferred method for resolving disputes if they arise in the future.
3. Service Period: If possible, include the service period of the nominee director in the agreement.
4. Fees and Terms: Cover any other terms of the agreement, such as fees and background checks if required. Ensure the agreement is written in simple language to prevent ambiguity.

If you engage a company incorporation provider, they often provide the nominee director agreement, but it is crucial to review it thoroughly before signing.

Can a Nominee Director Resign or Be Removed?

A nominee director can resign by submitting a letter of resignation. However, a replacement must be found before the nominee director resigns to ensure compliance with the requirement for at least one local director at all times.

Nominee directors can also be removed in case of disputes or if a replacement is available. It is common practice to prepare an undated letter of resignation signed by the nominee director at the time of the agreement, which can be used to remove the individual if they fail to fulfill their responsibilities later.

Singapore Nominee Director Fees

Unlike regular directors, nominee directors in Singapore do not receive a director’s salary or Central Provident Fund (CPF) contributions. Instead, they receive a fee for their services, typically upwards of SGD 1,000 per year, with additional charges for specific services. Some nominee director services may also request a security deposit to cover potential risks.

Maintaining Nominee Director Records

After hiring a nominee director, their details must be entered into the company’s Register of Nominee Directors, along with the details of the nominator. This register includes personal information, appointment dates, and more, as required by ACRA. Failure to maintain this register can result in fines of up to SGD 5,000.

Nominee Director vs. Director and Nominee Director vs. Nominee Shareholder

A nominee director and a regular director share similar legal responsibilities, but their roles in managerial duties and decision-making differ significantly. Nominee directors are generally not involved in the company’s day-to-day operations.

Additionally, a nominee director is distinct from a nominee shareholder, who acts as the registered owner of company shares but does not participate in managerial decisions.

Summary

Appointing a nominee director in Singapore is a vital step for business owners looking to establish or expand their presence in the country, while complying with legal requirements. Ensuring that the nominee director agreement is well-drafted and engaging an experienced company incorporation service are essential to minimise risks and ensure smooth operations. With the right nominee director, you can navigate the regulatory landscape in Singapore with confidence.

Using an incorporation service as an extension of your team

Setting up a company in Singapore can be challenging, but with professional support, it can be simple, Counto’s mission is to support your new business, take away the complexities of compliance, and save you time and money throughout the year. Speak to us directly on our chatbot, email us at [email protected], or contact us using this form.

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