Nominee Shareholder

🔹 Definition

A Nominee Shareholder is an individual or entity that holds shares in a company on behalf of another person, known as the beneficial owner. The nominee’s name appears on the official shareholder register, but they do not exercise real ownership rights and act solely under the instructions of the true owner.

Nominee shareholding arrangements are legally permissible in many jurisdictions, including Singapore, but are often subject to increased AML/CFT scrutiny due to their potential use in concealing beneficial ownership, facilitating tax evasion, or enabling illicit financial flows.

🔹 Frequently Asked Questions (FAQs)

Q1: Why would someone appoint a nominee shareholder?

• To protect the privacy of the beneficial owner
• To fulfill local ownership or residency requirements in certain jurisdictions
• To enable tax structuring or investment arrangements
• To hold shares temporarily during company incorporation or restructuring

Q2: Are nominee shareholders legal in Singapore?
Yes, but subject to key conditions:

• The identity of the beneficial owner must be known and documented
• Companies must maintain a Register of Registrable Controllers (RORC) disclosing ultimate ownership
• Nominee arrangements should be formalized in a written agreement, such as a Declaration of Trust
• Corporate service providers offering nominee shareholder services must conduct full CDD/KYC checks on all parties involved

Q3: What are the risks associated with nominee shareholding?

• Can be used to obscure true ownership, particularly in layered or offshore structures
• May raise red flags in regulatory reviews or due diligence processes
• Susceptible to abuse in money laundering, sanctions evasion, or fraud schemes
• Failure to disclose the true beneficial owner may result in regulatory penalties, especially under FATF-aligned frameworks

Q4: How should nominee shareholder arrangements be documented?

• Use a Nominee Shareholder Agreement or Declaration of Trust clearly stating:
  • The nominee acts only under instruction
  • The beneficial owner retains all rights (e.g., dividends, voting, sale)
  • The nominee has no economic interest in the shares
• Maintain clear audit trails and communication records
• Disclose the beneficial owner in the company’s RORC and to financial institutions when required

Q5: How do nominee shareholders impact compliance checks?

• Institutions must look beyond the nominee to identify the true beneficial owner
• Enhanced Due Diligence (EDD) may be triggered if nominee structures are involved
• Proper source of funds and wealth documentation should trace back to the beneficial owner
• Regulators may request justification for the nominee arrangement during inspections or audits