Nominee services are services provided by an individual or corporate nominee director, shareholder, founder, etc., who is nominated for this role according to the agreement for appointment by the owner of the company or the person who controls the legal entity.
Astra Trust provides nominee services to its clients for various needs, including enhanced confidentiality, asset protection, independent management or for the purpose of various structural arrangements. We can assist both with appointments at the company incorporation stage and with the provision of a nominee director or nominee shareholder to pre-existing companies.
Many of our clients who have decided to go offshore and incorporate an offshore corporate entity face the issue of confidentiality when it comes to the officers of such an entity. Often, they wish to remain behind the scenes of corporate management; in other words, they do not want their names to appear in the register of directors of the company. Or, perhaps, there is a possibility that the company will become a tax resident of their own country of residence in the case of their appointment as directors. On the contrary, sometimes the nominee director is required to make the company tax resident in the offshore jurisdiction rather than the owner’s jurisdiction.
In some offshore jurisdictions, such as the Isle of Man, information regarding the officers of a legal entity is open to the public. However, there may be no point for the beneficial owner to appear in the public registers. In Panama, for instance, there is a legal requirement to appoint several directors, and the owner of the company may not have any candidates for these positions. These are just a few situations where nominee director services may be extremely useful.
To appoint a nominee director, a beneficial owner enters into an agreement with such nominee, who agrees to act on the orders of the owner of the company and to resign at his first demand. For the beneficial owner, this inevitably results in the loss of some control over the company. To retain such control, a nominee director can be ordered to issue a power of attorney in the name of an owner of the company, or any other person chosen by the owner.
When our clients wish to distance themselves from the legal ownership of an offshore corporate entity, they make use of a nominee shareholder service. As with the nominee director, the beneficial owner enters into a nominee shareholder agreement with the nominee shareholder. In this way, he transfers the legal ownership of the asset, namely the shares of the company, to such nominee shareholder. In return, the nominee issues a declaration of trust, a document stating that the nominee holds the shares of the company by virtue of the so-called “bare trust”.
This means that the nominee shareholder does not have an absolute right of ownership over the shares in the company, but only holds them in his possession, and is obliged to return those shares to the beneficial owner on first demand. This arrangement became possible in common law offshore jurisdictions, where nominee and director shareholder services became as common as company formations themselves.
It is important that all documents are carefully drafted and that the beneficial owner has the possibility of replacing the nominee shareholder at any time. Obviously, however, these factors depend on the nominee services provider, which should be chosen carefully.
It is worth mentioning that there are potential downsides to using nominee services. For one, a nominee director or shareholder can be an obstacle to the opening of a bank account. Many reputable high street banks simply do not consider the opening of an account for such companies an option. Therefore, when a bank account is essential for a company, a very sensible approach should be taken when choosing the nominee.
It is advisable to do at least an internet check of the proposed nominee directors or shareholders before their appointment. Information will almost always be available, but close attention should be paid to whether the nominee has been involved in litigation, claims or illegal activities. For a nominee director in the UK, for instance, there is a register of excluded persons that can also be checked.
If you are considering company formation with a nominee director or shareholder, you should be aware that once the details of the directors or shareholders have been entered into the register, they cannot be deleted from it. This means that the details of nominees must be inserted into the registers during incorporation by the registered agent, rather than the details of the beneficiary.
Sometimes our clients may need to open an account using a nominee director service. It should be noted that the nominee director for bank account opening service is more complex than a simple appointment.
Generally, two different scenarios may arise regarding a nominee director opening a bank account. Some directors require full control over the account to be opened. In this case, the nominee service provider will require the director to be appointed as a signatory for the bank account of the offshore company.
There may also be situations where the professional director is not required to be appointed as a signatory on the account, but does require information about the company’s business transactions. This may reduce the nominee director service costs, as the director would spend less time operating the bank account and holding formal or informal meetings with the client and bank managers.
There are cases where the director is required to be resident in a particular jurisdiction. For example, banks in the UK will only open an account for companies with local directors. In these instances, the nominee director service in the UK jurisdiction must be provided by the local director.
The fees for the services of professional directors and nominee shareholders can vary considerably. For instance, the cost of a nominee director in the UK is generally higher than the cost of the same services in Panama or, say, Seychelles. However, UK company formation with nominee director services can generally be less expensive than, for example, setting up a Cayman Islands company with nominee company services or a professional director.
In some jurisdictions, where permitted by local legislation, it is possible to appoint corporate directors. In addition, corporate nominee services may cost less for appointments and annual maintenance. However, in the case of a due diligence process, more documentation will be necessary to disclose all information about corporate directors and shareholders. This may require additional effort and time to perform the due diligence.
Sometimes it may be wise to forego the use of nominee services to optimise expenses. Appointing a nominee shareholder in the UK jurisdiction may not be the best solution if the beneficial owner will be disclosed in the public PSC register at Companies House. However, nominee shareholder services in the UK may make perfect sense in the case of a special arrangement to conceal ownership from the public eye. Generally, nominee services in the UK are primarily used for the appointment of directors for a limited company or as a nominee partner in limited partnerships incorporated in the UK.
When deciding to use a nominee director and shareholder service, it is important to make sure that doing so will not harm your company’s structure and as a result put your wealth at risk. Generally speaking, we can say that using professional nominees is perfectly safe, as cases of misconduct by reputable companies are extremely rare. Nevertheless, it is vital for you as the beneficial owner to stay on the safe side.
Most registered agents in offshore jurisdictions will gladly provide you with nominee and incorporation services. However, it is a good idea to do your own investigation into the nominee’s particulars. Usually, sensitive information such as criminal or insolvency proceedings can be easily found on the internet. In some countries like the UK, there are registers of disqualified persons who are not allowed to be appointed as directors. Ask your agent for the register of nominee directors before making an appointment so that you can make an informed decision.
And last but not least, it is crucial that the beneficial owner of the company has all the necessary instruments to remove the nominee director or nominee shareholder from office at any time. All supporting documents, together with a power of attorney, must be provided by nominees. In addition, the beneficial owner of the company must at all times remain an account signatory of the company’s bank account if he wishes to retain control over the company’s funds and not use professional managers.
The appointment of a nominee director and shareholder is a very consequential step, which indeed affects the offshore entity, its assets and activities. However, if used correctly, it can yield many benefits.
Astra Trust has extensive experience with the provision of offshore nominee services. And all this experience can be used to your advantage. Contact us now through the contact form or email: email@example.com, and our team will be happy to assist you with a free initial consultation on any matter related to offshore services.