In Balancing Director Accountability with Sound Corporate Governance, ACRA addressed the difficulties faced by local resident directors when foreign owners become uncontactable.
ACRA explained that every Singapore-incorporated company must have at least one director who is ordinarily resident in Singapore. This ensures that there is someone locally responsible for the company’s compliance with its legal obligations, including filing annual returns and tax returns, and reporting suspicious transactions.
Nominee directorship is a legitimate service provided by CSPs to overseas clients. However, “nominee” does not mean that the director has no responsibilities. A CSP must be satisfied that the proposed individual is fit to be a director and can properly carry out the director’s duties. Before accepting an appointment, the individual should also understand those duties and conduct appropriate due diligence.
On the issue of exiting a nominee director appointment, ACRA provided two clear directions.
- First, when an employee or former employee asks to cease acting as a nominee director, the CSP should take reasonable steps to arrange a replacement. ACRA has also stated that it will take action against CSPs that engage in unethical practices.
- Second, where foreign owners have become uncontactable, causing the sole local resident director to face difficulties in discharging their duties, and the company is no longer carrying on business, the director may request ACRA to initiate the striking-off process.
This provides a way forward after a client has become uncontactable. For CSPs, however, compliance management should begin well before the client disappears or the nominee director asks to resign.
Address the issue in the IPPC and client agreement
CSPs should incorporate nominee director management into their internal policies, procedures and controls (IPPC). The framework should cover customer acceptance, director assessment, sharing of CDD information, ongoing monitoring, loss of contact, director replacement and regulatory escalation.
The same requirements should be reflected in the service agreement with the client. The agreement should address more than fees and the duration of the appointment. It should clearly specify:
- What business, financial and transactional information the client must provide on an ongoing basis;
- What information the nominee director is entitled to access in order to discharge their duties;
- What actions the CSP may take if the client fails to cooperate or respond;
- When a client will be treated as uncontactable;
- Who is responsible for arranging a replacement director;
- When services may be suspended or the business relationship terminated; and
- When the matter should be escalated to ACRA or another relevant authority.
A clause stating only that “the client is responsible for appointing a replacement director” is not enough. If the client becomes uncontactable, that obligation may be impossible to enforce.
Practical measures for CSPs
During onboarding, the CSP should share CDD information relevant to the director’s duties with the proposed nominee director, subject to applicable data protection requirements and internal authorisation controls. This should include information on the beneficial owners, the commercial purpose of establishing the company, its actual business activities, expected transactions, sources of funds, customer risk rating and any enhanced due diligence findings.
The nominee director should participate in the customer review, understand the associated risks and decide whether to accept the appointment. They should not receive only a basic company profile after the incorporation has been completed. The CSP should also retain records of the director’s review, questions and acceptance of the appointment.
During the appointment, the CSP should increase the frequency of reviews according to the customer’s risk level. In addition to updating CDD records, the CSP should assess whether the company’s actual activities remain consistent with its declared business, whether its shareholders or controllers have changed, whether transaction volumes are reasonable, and whether its annual and tax filing obligations are being met.
Material review findings and unusual circumstances should also be communicated promptly to the nominee director.
Once the client meets the IPPC’s definition of being uncontactable, the CSP should immediately activate its response procedures instead of merely continuing to send reminders. The CSP should:
- Attempt to contact the client and its controllers through email, telephone, the registered address and other known channels;
- Record the date, method and outcome of every contact attempt;
- Determine whether the company is still operating, holding assets or conducting transactions;
- Identify any outstanding corporate or tax filings;
- Assess whether there are money laundering, terrorism financing or proliferation financing risks;
- Escalate the matter to the compliance function and the nominee director; and
- Initiate the applicable procedures under the service agreement, such as suspending services, requesting further information or arranging a replacement director.
After completing the necessary contact attempts, checks and documentation, the sole local resident director may follow ACRA’s guidance and request ACRA to initiate striking off if the company is no longer carrying on business.
If the company is still operating, holding assets or conducting transactions, the CSP should not simply apply for striking off or assume that the nominee director can resign immediately. It should seek ACRA’s guidance promptly based on the company’s circumstances and address any outstanding compliance matters.
Where the review identifies suspicious circumstances, the CSP should also consider whether a suspicious transaction report must be filed with the Suspicious Transaction Reporting Office (STRO) under the applicable requirements. Referring the company or director matter to ACRA does not replace any STR obligations.
ACRA has provided a possible course of action where foreign owners are uncontactable and the company has ceased business. For CSPs, the more important step is to prepare in advance: incorporate nominee director management into the IPPC and client agreement, review CDD information jointly during onboarding, strengthen ongoing monitoring throughout the appointment, and investigate, document and escalate promptly when contact is lost.
This supports the nominee director in discharging their duties and helps the CSP demonstrate that it has taken reasonable steps to manage the associated risks.
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