Appointing a nominee director is a common practice for companies in Singapore, especially for foreign entities looking to comply with local regulations requiring at least one resident director. However, this practice comes with certain risks. To help entrepreneurs setting up a company in Singapore, this blog post outlines key steps to minimise the risks associated with appointing a nominee director.
The first crucial step is to select a trusted and reliable company secretary to offer nominee director services. A reputable corporate secretarial provider ensures that the nominee director is professional, trustworthy, and adheres to high ethical standards.
1. Sign a Formal Nominee Director Agreement: Have the nominee director sign a detailed agreement that clearly defines their responsibilities within the company. This agreement should specify that the nominee director’s role is non-executive and that they cannot interfere with business decisions or daily operations.
2. Limit Access to Sensitive Information: Restrict the nominee director’s access to sensitive company information and bank accounts. Provide only the necessary information required for them to fulfill their statutory obligations, reducing the risk of misuse of information.
1. Do Not Grant Bank Account Signing Rights: Avoid giving the nominee director the authority to sign on the company’s bank accounts. This significantly reduces the risk of financial mismanagement or unauthorised transactions.
2. Obtain Directors and Officers (D&O) Liability Insurance: Secure D&O insurance to cover potential liabilities faced by directors, including nominee directors. This can help protect both the company and the nominee director from financial risks.
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1. Maintain Clear Communication: Ensure there is clear and continuous communication about the nominee director’s role and limitations within the company structure. This helps prevent misunderstandings and ensures that the nominee director is aware of their non-executive status.
2. Ensure Compliance with Local Laws: Work closely with the nominee director to ensure the company adheres to all local laws and regulations, particularly in areas such as tax, accounting, and annual filings. This helps maintain legal compliance and reduces the risk of penalties.
1. Implement Regular Review and Oversight: Regularly review and oversee the activities of the nominee director to ensure they are acting within their defined role and not exceeding their authority. This can include periodic meetings and reports to monitor compliance and performance.
2. Maintain Proper Documentation: Keep detailed records of all interactions, decisions, and actions involving the nominee director. This documentation demonstrates compliance and protects the company in case of any disputes.
By implementing these measures, a company can significantly reduce the risks associated with appointing a nominee director while still meeting local regulatory requirements. Proper selection, clear agreements, limited access to sensitive information, financial safeguards, and continuous oversight are key strategies to ensure that a nominee director does not pose a risk to the company’s operations.
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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