🔹 Definition
A Nominee Director is an individual appointed to serve on a company’s board on behalf of another person or entity, usually without exercising independent decision-making authority. The nominee typically acts under instruction from the ultimate beneficial owner (UBO), investor, or client and may not be involved in the day-to-day operations of the business.
While the appointment of nominee directors is legally permitted in many jurisdictions, it is often associated with heightened AML/CFT and corporate transparency risks, especially when used to conceal ownership or control.
🔹 Frequently Asked Questions (FAQs)
Q1: Why are nominee directors appointed?
- To fulfill statutory local director requirements (e.g., in Singapore, every company must have at least one locally resident director)
- To protect the privacy of foreign beneficial owners
- To enable investment structuring through intermediaries
- To meet compliance or licensing prerequisites (e.g., to hold a position temporarily during incorporation)
Q2: Are nominee directors legal in Singapore?
Yes, but with conditions:
- The nominee must still comply with all directors’ duties under the Companies Act
- The relationship between the nominee and the instructing party should be documented (e.g., via a nominee director agreement)
- The company must disclose its ultimate beneficial ownership (UBO) to ACRA through the Register of Registrable Controllers (RORC)
- Service providers offering nominee directorships must conduct CDD/KYC checks and assess risk before appointment
Q3: What are the compliance risks of nominee directorships?
- Concealment of true ownership or control
- Use in shell companies or complex cross-border structures
- Exposure to tax evasion, money laundering, or sanctions evasion
- Directors may be held liable for corporate misconduct even if they act under instruction
- Lack of proper disclosure and documentation may breach AML/CFT regulations
Q4: What safeguards should be in place for nominee director arrangements?
- A formal nominee director agreement specifying duties, limits, and indemnity
- Periodic KYC and risk reassessments of the appointing party
- Ensure that nominee directors have no operational signing authority unless explicitly permitted
- Maintain audit trails and communication logs to evidence non-involvement in decision-making
- Notify regulators or file UBO disclosures as required by law
Q5: Are nominee directors common globally?
Yes, especially in:
- Offshore financial centers and jurisdictions with flexible incorporation laws
- Multinational investment structures or joint ventures
- Jurisdictions requiring local director residency for incorporation
That said, nominee structures are increasingly under scrutiny by FATF, OECD, and national regulators due to their potential for misuse.
