All business owners in Singapore are required to appoint a director who is a local resident or they will not be allowed to register their company. This is a requirement under the Companies Act and the local director is the person the government can hold accountable if the company breaks any laws. To qualify as a local director, an individual must live in Singapore and have a permanent address. They can be a citizen or a permanent resident of Singapore or hold an Employment Pass (a work visa issued by the Ministry of Manpower to foreign professionals). Finding a local director can be a tall order for most foreign companies, especially those making their first foray into Singapore. Fortunately, they can overcome this hurdle by appointing a nominee director.
The simplest meaning of nominee director is an individual who has been appointed to act as the director of a company on behalf of another individual (the business owner) or entity (the company). A Singapore nominee director is the face of the company in the country and primarily exists to fulfil legal and regulatory requirements laid out in the Companies Act. Nominee directors have no involvement in the company’s day-to-day business, due to which they are also sometimes referred to as ‘sleeping directors’ or ‘inactive directors’.
If you do not have a resident director or a nominee director in Singapore, the Accounting and Corporate Regulatory Authority (ACRA) will not register your company.
Apart from being important from an incorporation point of view, a nominee director is an essential personnel on your board as they have the knowledge you need to make sure that your business does not break any rules or regulations, especially if you are operating in a foreign country for the first time.
A nominee director’s duty, first and foremost, is to act in the best interest of the company and to ensure that it abides by Singapore laws at all times. Some responsibilities nominee directors in Singapore fulfil include:
Due to their non-executive role, nominee directors do not have the power to:
Under the Companies Act, a Singapore nominee director must be:
You cannot be a Singapore nominee director if you are:
There are mainly two reasons for appointing a Singapore nominee director:
You may appoint a business associate or an employee who resides in Singapore, provided they fulfil ACRA’s nominee director requirements. If you do not know anyone locally, you can reach out to a corporate services provider. There are numerous firms that offer or specialise in nominee director services. It’s easy to locate one on Google. But make sure to go with a reputable firm.
Despite holding a non-executive position, your Singapore nominee director’s responsibilities are mainly focused on legal compliance. Therefore, it is extremely important to appoint an individual who is not only knowledgeable about laws and regulations, but also has experience working in such a role and can discharge their duties efficiently. Nominee director risks extend both ways. If the company breaches the law, the nominee director will be held accountable and may even face prosecution.
Given the risks involved, a watertight nominee director agreement should be a top priority for business owners, individuals appointed to the position, and corporate services providers. It goes without saying that a formal written document signed by the nominee director is better than an informal or verbal contract based on trust. To ensure that the agreement has no loopholes, it must:
Apart from being detailed and precise, the agreement must be written in simple language so that it leaves no room for ambiguity and confusion.
If a corporate services provider is involved, they will likely provide you with the agreement. Business owners are advised to review it thoroughly before signing.
If a nominee director wants to step down from the post, they may do so by writing a letter of resignation. However, the company must find a replacement before they quit as the law demands that companies must have one local director at all times.
Nominee directors can also be removed – for example, if a dispute arises or if the company has a replacement in mind (such as an employee with an EP and a local address). In fact, it is common practice for companies to prepare an undated letter of resignation signed by the nominee director at the time of signing the nominee director agreement. The company can use this letter to remove the individual if they fail to fulfil their responsibilities at a later date.
A nominee director in Singapore is not paid the same salary as a regular director. They are also not entitled to central provident fund (CPF) contributions from the company. Instead, they receive a fee for their service. Nominee director fees in Singapore range from SGD 1,000 to SGD 5,000 per year. Additional charges may apply for specific services.
Corporate services providers might also ask for a security deposit to offset certain Singapore nominee directors risks, such as statutory fines for late or incorrect filings. It is advisable to consider multiple options to get the best price. Most nominee director service providers have provisions for free quotes to help you get started.
Once appointed, the nominee director’s details must be entered in the company’s Register of Nominee Directors along with details of the nominator. These include full names (and aliases if any), residential and official addresses, nationalities, identity card numbers, dates of birth, date of nomination as well as jurisdiction and Unique Entity Number (UEN) if the nominator is an entity. It is mandatory to maintain such a register under ACRA’s nominee directors rules. The regulator can ask you to produce your Register of Nominee Directors for inspection at any given time. If you fail to do so or haven’t maintained one properly, you can face a fine of SGD 5,000.
A nominee director and a regular director share the same regulatory responsibilities. But when it comes to managerial duties and decision-making, their roles are vastly different:
When you appoint a nominee director, they act as the director of a company on your behalf. When you appoint a nominee shareholder, they lend you their name and act as the registered owner of your shares in a company. In both instances, you retain full control of the company or shares and can also keep your ownership confidential. In many cases, family members, friends, trusted associates and professionals (e.g, lawyers, accountants) are appointed as both nominee directors and nominee shareholders. In Singapore, it is not uncommon for the nominee director to also be appointed as a nominee shareholder.
However, nominee directors and shareholders are different entities altogether. Typically, nominee directors do not own shares in a company so as to maintain a limited role and interest in the business and to avoid conflicts in the future.
To know more about how to engage a nominee director and register your company in Singapore, you may read our articles ‘Company Incorporation In Singapore’ and ‘How to Register a Company in Singapore’.