Does your company require the support of a nominee director

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nominee director

You must have already come across several posts and job requirements for nominee directors. There are scores of companies in the country and abroad providing such services, but what is the actual responsibility of a nominee director? How much power do they have in your company? How can they help your business or hurt your business once you appoint them? These are some of the very fundamental questions any business owner should ask before opting for the services of a nominee director.

Just like any other business, the quality of service depends on the standard of the provider. Exercise caution while picking your nominee services. Even though you will not be providing the nominee director with essential details like the company account number, you will need to trust them with several operational information.

Who is a nominee director?

The duty of a nominee director is identical to that of an independent director. Their responsibility consists of taking care of the best interests of a company. A nominee director shares a fiduciary relationship with a corporation. That automatically means that it is the primary responsibility of the “employee” to avoid any conflict of interest between the company and their appointer. Therefore, the method of his or her appointment (by shareholders or independent) is irrelevant in regards to their duties.

Where does the loyalty of a nominee director lie?

It seems like a harmless and straightforward question, but finding the right answer to this might not be as simple. The nominee director does not have a fiduciary relationship with the shareholder who has appointed him or her. While several CEOs and shareholders believe that the loyalty of the nominee director lies with them, they are, in fact, grossly wrong. Although they might play instrumental roles in the appointment of the nominee director, the latter have no duties to the nominator.

  1. There will be several situations within the corporation, where the interests of the company and that of the shareholders will dovetail. Irrespective of their personal connects the nominee director should put the company’s interest forward.
  2. The nominee director cannot confer with the nominator about company policies and convey confidential information.
  3. In the events of company insolvency, the nominee directors should always uphold the interest of the corporation and the creditors. Their decisions should not waver under the influence of the nominating member of the board of directors.

There are situations, where more than one fiduciary duty is in action. For example – when a nominating shareholder appoints the nominee director. However, the primary interest of the nominee director should always align with the benefit of the company. His or her first loyalty should be to the company. It is fallacious for a shareholder to believe that his appointed nominee director will give precedence to their interests.

What happens during acquisitions and multiple nominations?

When a corporation or a consortium of enterprises overtakes another company, the new owners might arrange for a nominee to take over the board of their acquired company. In the event, there are multiple owners or joint-owners; each owner usually assigns a nominee director with the hope that they will represent their interest in the board. Depending on the structure of the new ownership, there can be one or multiple nominee directors ready for assuming board positions.

If you consider the priorities and duties of a nominee director, it becomes clear that the loyalty of the newly appointed nominee directors should lie with the new company and not the mother companies. In fact, if any director favors a particular proprietor, he or she could be directly violating the terms of their appointment.

How can utilizing the service of nominee directors help you meet the statutory requirements of a country?

The globalization of trade and commerce has effaced national boundaries for several businesses. Therefore, it is not uncommon for an entrepreneur to dream about expanding to a foreign market. Trading on the US soil or running a business in EU is very different from trying to establish a local market in the Asian countries. Firstly, the commerce laws in the Asian countries are very different from the ones in the west. Secondly, the violation can lead to hefty penalties for the cancellation of business permits. Thirdly, in countries like Singapore, a corporation needs to have at least one residential director onshore.

The suit of legal and commercial requirements can be tight to meet, but the presence of a trained and dedicated nominee director service can help. In fact, you can check out the effectiveness of opting for the outsourcing directorial needs of a company right here When you appoint a local director, you can be sure that your company is meeting all statutory requirements, irrespective of your geographic location.

nominee director

Can they help with business tax and tax refunds?

Almost all distinguished nominee director services also offer accounting and tax consultancy services to the entrepreneurs. Taking care of company tax, trustee funds and abiding by the commercial laws of a new country can become impossible without a reliable guidance system. The presence of dedicated nominee director services can help you when your board of directors is feeling at sea in a new and unknown market. The aim of hiring nominee services might be the safeguarding of the owner’s or shareholders’ identity, but these nominee services can also help you with business accounting and tax services.

The nominees are usually residents with a working knowledge of tax laws. Additionally, your business will enjoy an upper hand concerning tax substance. Since most transactions will take place within the country with the help of local employees, it will be a double tax advantage.

Appointing a nominee director does not compromise your hold or power as a shareholder or director, in any way. It only provides you with a protective shield, in case you do not want an association between your name and the off-shore corporation. Additionally, the nominee director will take up the responsibility of taking care of your business, meeting statutory requisites and helping with business taxes, while you can enjoy the control.

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