Every entrepreneur knows about the worldwide legal requirement to appoint at least one company director. The time of appointment of a director is set differently in each country. Sometimes, it is necessary to appoint a director immediately after the creation of the company, other times - no later than a certain period. There are even some countries, whose laws imply no requirements for the appointment of a director. However, all countries have a general rule: without a director, a company cannot start its activities.
For one reason or another, entrepreneurs turn to the services of nominees who act as directors / shareholders / secretaries of the company only formally, in a passive role. Nominee services can be provided for the positions of director, shareholder or secretary. However, most of the questions usually arise in relation to the nominee director.
What are the benefits of a nominee offshore service?
1. Confidentiality is perhaps the very first reason for using nominal services. This is especially important in jurisdictions where the registers of directors and shareholders are open, meaning that data on directors and shareholders of the company is publicly available (Great Britain, Hong Kong, etc).
2. Compliance with local legal requirements. Sometimes the use of the services of a nominee director becomes inevitable, because the registration of the company is impossible without at least one resident director (Singapore).
In Cyprus, for example, there is no legal requirement for the residency of a director, however, in the vast majority of cases, the directors of Cypriot companies are nominal Cypriots. The reason is that a necessary condition for obtaining tax benefits from the use of a Cypriot company is the recognition of such a company as a resident. Thus, a Cypriot “in the chair of the director of your company” is not necessary, but very beneficial and impossible to refuse.
3. Avoiding signature conflicts. As a rule, an offshore is not used as an independent structure, but in conjunction with other companies, where the same person can act as the beneficiary. So that contracts between such companies are not signed by the same person on both sides, a nominee director is placed offshore.
4. Company image and reputation. If the company is registered in a respectable jurisdiction, this is a plus for the company's image. If the director of the company is a resident of a respectable jurisdiction, this is a double plus.
Are there any downsides to using a nominee service offshore?
The nominee service is paid.
How to avoid risks when using the services of a nominee director?
Although the nominee director is a behind-the-scenes player, “on paper” he has the powers of a director who is empowered to act on behalf of the company, making decisions.
In fact, decisions on the company are made according to the beneficiary, but on behalf of the nominee director. This happens as follows: the beneficiary makes a decision, then he gives the appropriate instructions to the nominee director, who on his own behalf signs this decision.
Many are worried about the risk of abuse of power by a nominee director or shareholder. Such stories have not happened in practice, but, theoretically, such a scenario can be assumed. However, there are guaranteed methods of protection against this.
In order to insure against unwanted actions, when registering the company, the beneficiary is given "blank" documents, where there is a signature of the denomination, but with no date.
In this way, you'll have prepared a letter of exemption for the nominee director, as well as a decision on the appointment of a new one. With such documents in hand, the beneficiary can dismiss the nominee director at any time, even retroactively. Accordingly, all actions of the nominee director, performed after his dismissal, are invalidated.
Can a nominee director use the corporate bank account?
Most European banks allow an attorney to act as account manager, rather than director of the company. Thus, a corporate account is usually opened without the participation of the director of the company, and if the director is nominal, then, as a rule, without his knowledge.
An attorney acting on behalf of the company opens an account with a foreign bank and accordingly becomes the account manager. Only the manager has the right to carry out transactions on the account. If the director of the company has not declared himself as a manager, then he will not be able to use the funds on the account. In case of any doubtful situation, the bank will contact the account manager first.
