The Responsibilities of a Nominee Director Under the SG Law
Different types of directors can be hired or appointed in a company in Singapore – one of them being a nominee director. Suppose you are a foreigner planning to establish your own business in Singapore. In that case, you should probably be aware that every Singapore-incorporated company is mandated to have at least one resident director for compliance reasons. Many businesses resort to hiring a nominee director to satisfy this particular requirement.
A nominee director is a third-party individual representing your company or organisation when it has no local director to fulfil certain corporate responsibilities. The term ‘nominee’ signifies that the role of a nominee director is strictly non-executive. Furthermore, their duties and liabilities are specifically laid down by the law. Read on to find out more about the responsibilities of a nominee director in Singapore.
What exactly is a nominee director?
As mentioned earlier, a nominee director is an individual hired or appointed by foreign entrepreneurs to act as a director for their business in compliance with the legal requirement set forth in Section 145 of Singapore’s Companies Act, which requires all companies in the country to have at least one director who is a resident of Singapore.
The appointment of a nominee director is usually made at the start of company incorporation when the foreign business has no permanent residents, EP holders, or Singapore citizens in their management roster. Under the Companies Act, one should be at least 18 years old and a permanent resident, EP holder, or Singapore citizen in order to qualify as a nominee director. Moreover, they must possess none of the following disqualifications:
- Being an undischarged bankrupt.
- Having been convicted by a competent court of three or more offences involving ACRA filing.
- Having been convicted of any offence involving dishonesty and fraud, which carries a punishment of imprisonment for over three months.
- Having been involved with three or more companies struck off by ACRA within five years.
- Being an unfit director for insolvent companies.
- Being disqualified for companies winding up due to national security or interest concerns.
- Failing to make returns.
Essential responsibilities of a nominee director
The role of a nominee director is strictly non-executive. This means they cannot interfere with or make any business decisions for the company that hired them, and they are not required to come to the business office and be present at negotiations. The function of a nominee director is essentially for formalities only. Nonetheless, they are still expected to fulfil the general responsibilities of a company director, such as the following:
- Avoid conflict of interest between the interest of the company and their personal interest.
- Always act in good faith on behalf of the company they represent.
- Approve annual audited accounts.
- Sign on routine notices.
- Convene an annual general conference.
- Execute annual returns, if requested.
Principal liabilities faced by a nominee director
Nominee directors generally face two main types of liabilities: administrative and financial. The risks of administrative liability usually come from safety and health issues, environmental issues, data protection or cybersecurity issues, and tax and accounting issues. Any mistake or wrongdoing in the company’s operation with regard to the aforementioned matters can result in personal fines for the company’s directors.
Similarly, if the company conducts an illegal financial transaction or goes bankrupt, its directors will also be liable for their personal assets. This means their liability is not limited to company assets but includes the directors’ personal funds. Since nominee directors are essentially directors of the company, they answer to both the administrative and financial liabilities that the company might incur.
Overall, the function of a nominee director is generally limited to ensuring that the company they work with adheres to Singapore’s regulatory obligations. They do not participate in the management of the business. Nevertheless, there are still instances in which they may be liable administratively and financially. Hence, it is important to know the ins and outs of nominee director appointments in Singapore to ensure that your company chooses the ideal one.
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