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.
What is 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’.
Why do you need a nominee director?
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.
What is the role of a nominee director?
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:
- Convening annual general meetings.
- Signing routine notices, such as tax documents and bank opening resolutions.
- Ensuring regulatory filings (e.g, tax returns) are done on time.
- Maintaining accounting records.
Due to their non-executive role, nominee directors do not have the power to:
- Attend meetings.
- Vote at meetings.
- Be the authorised signatory for the company’s bank accounts.
- Act independently. They must always follow the instructions of their nominator (usually the business owner).
Who can be a nominee director in Singapore?
Under the Companies Act, a Singapore nominee director must be:
- A Singapore citizen, a Singapore Permanent Resident, or the holder of an Employment Pass (EP). However, an EP holder can be made a nominee director only after the company has been incorporated because the business must first exist in order to sponsor EPs for its employees.
- Have a permanent address in Singapore.
- Be 18 years of age or older.
You cannot be a Singapore nominee director if you are:
- An undischarged bankrupt (legally bankrupt but still owes money and can’t borrow more).
- Convicted of a crime involving fraud or any other dishonesty that carries a prison sentence of more than three months.
- Convicted by a court of three or more ACRA filing offences.
- Involved with three or more companies that ACRA struck off its register within five years.
- Disqualified due to company winding up (shut down voluntarily or on court orders) on grounds of national interest/security.
- Disqualified as an unfit director of an insolvent company.
- Disqualified for failing to make tax returns.
When do you need a nominee director?
There are mainly two reasons for appointing a Singapore nominee director:
- You are a foreign entity and want to start a business or expand your existing business in Singapore but don’t want to relocate there. Many foreign entrepreneurs coming to Singapore might not know any locals who are capable of and willing to be a resident director. The best option is to appoint a nominee director. If you don’t know anyone, you can simply hire one from a company that offers corporate services or a specialised nominee director services provider.
- You wish to remain anonymous and not have your name on the Registry of Nominee Directors, which all companies must maintain under the Companies Act unless exempt to do so. Many business owners – even those with a permanent address in Singapore – prefer anonymity.
How can I find a nominee director in Singapore?
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.
Are there risks involved in hiring a nominee director in Singapore?
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.
How do I appoint a nominee director in Singapore?
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:
- Give a detailed account of the responsibilities and powers of the nominee director.
- Clearly state that the nominee director does not hold any operational role and is not authorised to make decisions, unless specifically instructed to do so.
- Include the preferred method of resolving a dispute should one arise.
- Provide the service period of the nominee director, if possible.
- Cover any other terms of agreement (e.g, fees, documents, background checks if required).
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.
Can a nominee director quit or be removed?
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.
How much are Singapore nominee director fees?
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.
What’s next after appointing a nominee director?
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.
Nominee director vs director
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:
Nominee director vs nominee shareholder
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.
Get started with Aspire
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’.
Getting a new start in Singapore is also easier with Aspire’s Business Account, which allows you to transact quickly and safely in multiple currencies at competitive rates.
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