When you set up a company in Singapore, one of the legal requirements is that at least one director must be a local resident with a local address.
For many foreign entrepreneurs, this is the first challenge: What if I do not live in Singapore or do not know someone locally who can act as a director? This is where nominee director services in Singapore come in.
In this article, we will explain what a nominee director is, why they are needed, the legal responsibilities involved, and the advantages and risks of appointing one when you start your business.
Definition of a Nominee Director
A nominee director in Singapore is an individual appointed to fulfil the local director requirement set out in the Companies Act 1967, and who generally does not participate in the company’s day-to-day operations.
The term “nominee” refers to a person who serves on behalf of another party, most often representing a foreign shareholder or the owner of the company.
However, while the arrangement is often commercial, the legal status of a nominee director is no different from any other director. They carry the same duties, responsibilities, and potential liabilities as any other board member under Singapore law.
Why Nominee Directors Exist
The main reason nominee directors exist in Singapore is because of Section 145(1) of the Companies Act 1967, which requires:
“Every company shall have at least one director who is ordinarily resident in Singapore.”
This guarantees that each Singapore-registered company has a locally based individual who can be held legally responsible for the company’s activities.
Situations where nominee director services are commonly used:
- Foreign entrepreneurs incorporating a company in Singapore.
- Overseas corporations opening a subsidiary or branch in Singapore.
- Startups with global founders who do not yet have a Singapore-based partner.
Duties and Legal Responsibilities
It is essential to recognise that even when a nominee director is appointed solely to meet Singapore’s local director requirement, the law regards them as having the same status and responsibilities as any other director.
Their responsibilities include:
- Fiduciary duties – The obligation to act in the company’s best interests while steering clear of any situations that could create a conflict of interest.
- Statutory duties – Ensuring compliance with the Companies Act 1967, including proper maintenance of company registers, timely filing of annual returns, and holding annual general meetings (unless exempted).
- Duty of care, skill, and diligence – Making informed decisions and exercising reasonable care in managing company affairs.
If the company breaches regulations or fails to file statutory documents, the nominee director can be held personally liable, which can include fines or even imprisonment.
What Nominee Directors Do and Do Not Do
In most nominee director arrangements in Singapore, the nominee does not participate in the daily operations of the business unless specifically agreed upon.
They usually will:
- Act as the official local resident director to satisfy legal requirements.
- Sign compliance-related documents within their agreed scope.
- Liaise with the corporate secretary to ensure statutory filings are made on time.
They usually will not:
- Make operational or commercial decisions for the company.
- Manage hiring, sales, or contracts.
- Access company bank accounts unless acting as an executive director.
The foreign shareholder or appointed executive directors handle the business operations, while the nominee director’s role focuses on statutory compliance.
Risks for Nominee Directors
The position of a nominee director involves legal risks, as they are still accountable for the company’s compliance even if they are not actively involved in its operations.
Reputable nominee director service providers in Singapore manage these risks by:
- Vetting clients carefully to avoid high-risk or non-compliant businesses.
- Requiring a formal nominee director agreement that defines the scope of work.
- Requesting a refundable security deposit as protection against potential liabilities.
Nominee Director Agreement
A nominee director agreement is a private contract between the nominee director and the appointing shareholder. It typically includes:
- A provision stating that the nominee will not participate in the day-to-day operations.
- Indemnity provisions to protect the nominee from liabilities caused by actions they did not approve.
- Terms for ending the appointment.
- An obligation for the company to ensure compliance with Singapore’s legal requirements.
This agreement does not override the Companies Act 1967, so the nominee director can still face legal consequences if the company engages in unlawful activities.
Corporate Secretary and Nominee Director
A corporate secretary in Singapore is crucial for the efficient operation of any company and collaborates closely with the nominee director.
The corporate secretary:
- Prepares and files statutory documents on time.
- Maintains accurate company registers.
- Keeps directors updated on compliance deadlines.
- Acts as a communication bridge between foreign shareholders and the nominee.
This partnership reduces compliance risks for the nominee director and ensures the company meets all legal obligations.
Advantages of Using Nominee Director Services
For foreign entrepreneurs and businesses, engaging nominee director services in Singapore provides several advantages:
- Ability to incorporate a company without relocating to Singapore immediately.
- Faster setup and start of operations.
- Meeting the local director requirement while retaining complete control over business decisions.
Disadvantages and Risks
While nominee directors are useful, they also come with potential downsides:
- Service costs – Professional providers charge annual fees and require a security deposit.
- Limited involvement – The nominee director will not be involved in the day-to-day management of the business.
- Relationship risk – Miscommunication can slow administrative processes.
- Legal exposure – Both the nominee and the company can face penalties for non-compliance.
5 Best Practices for Appointing a Nominee Director in Singapore
To use a nominee director arrangement effectively:
- Engage a reputable corporate services provider rather than relying on informal arrangements.
- Execute a detailed nominee director agreement that defines roles and responsibilities.
- Communicate regularly with your nominee director about compliance matters.
- Meet all filing deadlines to avoid penalties.
- Plan for the future by identifying a long-term local director if needed.
Conclusion
A nominee director is an essential solution for many foreign entrepreneurs who want to incorporate a Singapore company but do not have a local partner.
Although the arrangement may appear administrative, the legal obligations are serious. Both parties must understand their roles and maintain compliance with the Companies Act 1967.
With the guidance of a qualified corporate secretary in Singapore and a well-structured nominee director agreement, this arrangement can be a safe and effective way to meet the local director requirement while pursuing your business goals in Singapore.