Nominee Director fees may rise with the pending legislative amendments affecting corporate secretarial service providers.
If you are foreign company, start-up or individual and are new to the Singapore business ecosystem, and have been researching about setting up Singapore companies, you would know that Singapore Companies Act requires at least one local resident director for a Private Limited company.
If your company has 100% foreign owners, you must appoint a nominee director to fulfil this mandatory requirement of the Companies Act
The nominee director can be
- A Singapore citizen, or
- Permanent resident, or
- Employment Pass holder
and has a Singapore residential address.
A nominee director is a person appointed by a company to act as a director in the company’s name. The nominee director may be appointed by the company’s board of directors, or even the shareholders. The appointment of a nominee director is often used to protect the company from potential legal action by third parties.
If you want to appoint a nominee resident director in Singapore, there are a few ways to do so. You can either:
- Ask a friend or family member to be your local director;
- Appoint a professional corporate service provider for this service; or
- Nominate an existing company director.
Why are Nominee Director fees going up?
Right now and according to the Companies Act, there are no specific requirements for Corporate Service Providers (CSP) to ensure that the individuals they appoint as nominee directors are fit and proper. There are also no additional obligations imposed on individuals acting as nominees directors by way of business.
The Government of Singapore however, is proposing that this be changed through a legislative amendment and the introduction of a new Bill, the Corporate Service Providers Bill (CSP Bill). The new CSP Bill will require CSP to ensure that individuals they appoint to act as nominee directors are fit and proper; and satisfy prescribed training requirements, if they hold more than a legally prescribed number of nominee directorships by way of business (unless they are qualified persons).
A qualified person is an individual who satisfies such criteria as may be prescribed by the Government authorities but the general requirements for being a registered qualified person are:
- be a qualified individual, which term is defined in the ACRA (Filing Agents and Qualified Individuals) Regulations to mean:
- an advocate and solicitor of the Supreme Court of Singapore;
- a public accountant registered under the Accountants Act 2004;
- a member of the Institute of Singapore Chartered Accountants;
- a member of the Association of International Accountants (Singapore Branch);
- a member of the Institute of Company Accountants, Singapore;
- a member of the Chartered Secretaries Institute of Singapore; or
- a corporate secretarial agent; i.e. a person who is carrying on the business of providing corporate secretarial services for one or more companies and has been doing so for at least 3 years in the preceding 5 years; and has been a secretary of a company for at least 3 years in the preceding 5 years.;
- be a fit and proper person; and
- if applicable, not less than 2 years have elapsed since the cancellation of his previous registration as a qualified individual due to a sanction by ACRA.
The new CSP Bill has been introduced because there has been a significant increase in the misuse of nominee directorship arrangements in the creation and misuse of shell companies by concealing the identity of a company’s true beneficial owners, in order to facilitate money laundering.
The Singapore Government observed that the situation is largely created by CSPs, who in carrying on business of providing nomineeship directorship services and appoint unqualified individuals to act as nominee directors. Such individuals who act as nominee directors are also not required to comply with additional legal obligations relating to directorship.
Therefore, the proposed amendments are intended to address these risks and prevent the misuse of nominee directorship arrangements by way of business, and to improve the quality of individuals who act as nominee directors by way of business.
Also, right now, individuals who are nominee directors/shareholders are only required to disclose their particulars to their companies, and such information has to be maintained in the Register of Nominee Directors. This information is not publicly available nor submitted to ACRA.
But with the introduction of the new Bill, the Government will require nominee directors and shareholders to disclose their nominee status and the identity of their nominators to ACRA and for ACRA to maintain such information. Upon disclosure to ACRA, the nominee status of the director/shareholder will be made publicly available.
With the amendments to the Financial Action Task Force’s (FATF) recommendations in February 2022, to enhance the transparency of nominee arrangements, the new measures are proposed.
The FATF Recommendations now require nominee directors and shareholders to disclose their nominee status and the identity of their nominator to ACRA and for ACRA to maintain such information. They also require that the nominee status of the director/shareholder be made publicly available.
Paul Ho, the chief officer of Articulat Private Limited, said, “with all these new requirements that are proposed in the CSP Bill, there are more compliances for corporate secretarial service providers.”
“We have to accept that the new proposed requirements will improve transparency over nominee arrangements and that it will also prevent misuse of nominee directorship arrangements.”
“But with the improvements to the quality of individuals who act as nominee directors by way of business will also come an increase in Nominee Director fees provided by CSP,” Mr Ho added.
“This is because CSP now has to screen that the Nominee Director it provides is a Qualified Person and will comply with additional legal obligations relating to directorship”
CSP currently charge anywhere between $1,800 and $3,000 to provide a Nominee Director to a company which is 100% foreign owned.
With the proposed legislative amendments, the Nominee Director fee is expected to rise to the range of $2,500 – $4,000 depending on the assessed risk level of being a Nominee Director by the CSP.
The proposed amendments and the new Bill will address the risks presented by the misuse of nominee arrangements in the creation of shell companies to facilitate money laundering, and to require individuals who act as nominee directors, by way of business, to be qualified persons.
With that Companies which are 100% foreign owned will also have better peace of mind that the Nominee Director they have appointed is an individual qualified to transact on official matters on behalf of the company.