Starting a company in Singapore is straightforward by partnering with Business Incorporation Services Provider like Bestar Services. However, you must hire directors while incorporating your new company, especially a nominee director, to ensure your company abides by the laws and potential legal action by third parties.
In this blog, we will walk you through the reasons for Hiring a Nominee Director for a New Company in Singapore.
Who is a Nominee Director?
A Nominee Director is appointed by the company’s board of directors, top management committee, or shareholders whose duty is to protect the company from potential legal actions & litigations by third parties.
A Nominee Director acts on behalf of directors or top management. They must be knowledgeable about the company’s affairs and should be wiser to provide strategic advice & proper guidance to the board whenever required.
The primary purpose of hiring/appointing a Nominee Director is to give a person a certain level of control over the company without having to serve directly on the board of directors or shareholders.
Reasons for Hiring/Appointing a Nominee Director
You must be aware of a Nominee Director’s particular roles & responsibilities. The following are the salient duties you must consider for hiring/appointing a Nominee Director:
Board Meetings
Stakeholders or Shareholders can appoint a Nominee Director to ensure they actively engage in the day-to-day company’s operations on their behalf. There might be circumstances when all stakeholders or shareholders cannot attend board meetings for numerous reasons.
A Nominee Director acts on their behalf by attending board meetings & provide their valuable inputs on various company matters on behalf of the nominators (shareholder/stakeholder).
Ensures Accountability
A Nominee Director’s key role is to ensure transparency & accountability in the company by assuring the company complies with different laws in Singapore & must act in good faith on the company’s behalf. They must take responsibility & liability for any breach of the company’s code of conduct or malpractice.
They can have a direct voice in the company’s management on behalf of investors & shareholders to protect their investments. And also, they have the right to resolve disputes between shareholders & business owners by acting as a neutral third party. To summarise, they have the responsibility to run the company in an equitable and unbiased manner.
Fulfil & Protect the Interests of Nominators
Another primary role of a Nominee Director is to ensure they fulfil the wishes & protect the interests of their nominators.
Nominee Directors are not entitled to make decisions independently like Independent Directors, but they must ensure the company operates in alignment with the nominator’s interests & wishes. And also protect their investments by being their valuable asset.
The Nominee Director has the right to vote on behalf of their nominators (investors) if anything isn’t in their best interests. It gives investors & shareholders a sense of assurance that their voices & opinions are heard even if they are not present.
Legal Requirement for Company’s Incorporation
Suppose you are running a foreign company that wants to set up its business in Singapore. In that case, you must have a local Singapore individual on your board of directors according to Singapore Law. You can appoint a Nominee Director instead of hiring a local person.
According to the Singapore Companies Act 1967, A Nominee Director can be a citizen or permanent resident of Singapore. The Company Director with a Singapore Employment Pass with a permanent Singapore address is eligible to become a Nominee Director. They should act in good faith & make informed decisions for the hired/appointed organisation.
In-Charge in your Presence and Absence
ACRA (Accounting and Corporate Regulatory Authority) defines a Nominee Resident Director as a person acting according to business, investors, or shareholder interests, wishes, directions and instructions.
A Nominee Director is expected to be trustworthy, unprejudiced, and transparent in looking after business operations in your presence and absence both. They can be in charge of organising & holding AGMs.
They are authorised to ensure crucial business tasks, such as tax filing, settlement of company’s accounts, and invoice payments, are carried out punctually.
Liabilities & Risks
It is vital for business owners, stakeholders, shareholders, and investors to weigh the liabilities & risks of hiring/appointing a Nominee Director. As they are not the company’s employees, they aren’t restrained by the organisation’s employment contracts & obligations.
Hence, they might not give the same commitment, determination, and time as other employed directors. It can lead to a lack of accountability and transparency. Also, the Nominee Director might not have the same level of experience & expertise as the company’s board of directors & employees. Hence, they might be unable to make informed decisions in the company’s & nominators’ interests.
Conclusion
After reading the blog, you will have a firm clarification on why you should hire/appoint a Nominee Director. The Nominee Director is concerned with various duties & accountability, such as board meetings, fulfiling & protecting the interests and wishes of the Nominators, being In-Charge in your Presence and Absence, Liabilities & Risk associated, and most importantly, Legal Requirements for the Company’s Incorporation in Singapore.
However, if you have questions or need assistance, feel free to contact us.
At Bestar Services, we provide comprehensive Company Incorporation Services in Singapore. Our business advisory consultants will guide you through the entire process, including hiring a Nominee Director to ensure your company complies with Singapore Laws.
We also provide business services, including Audit & Assurance, HR & Payroll, Corporate Support Services, Tax Advisory & Compliance, and Business Advisory.
For a consultation with our Business Advisory Consultant, contact us via email at admin@bestar.asia or call at +65 62994730.
