The Responsibilities of Nominee Directors in Singapore
When it comes to setting up a company in Singapore, a common practice is the appointing of nominee directors. These are individuals appointed by a company to act as a director on its board. However, they typically have no active role in the company’s management and are often appointed for specific purposes, such as meeting regulatory requirements.
Compliance, Duties and Responsibilities
One of the primary responsibilities of a nominee director is ensuring that the company complies with all Singapore laws and regulations. This includes adhering to tax laws, corporate governance standards, and any industry-specific regulations that may apply to the company’s operations. They must also be proactive in compliance matters from day one, rather than waiting for year-end assessments.
Nominee directors owe fiduciary duties to the company, which means they must act in the best interests of the company at all times. This duty includes making decisions that are in the company’s best interests, avoiding conflicts of interest, and maintaining confidentiality regarding the company’s affairs.
Due Diligence and Avoiding Unlawful Activities
For safeguarding purposes, nominee directors must conduct comprehensive background checks and continuous monitoring of companies. Seek opportunities for personal meetings with clients and take the lead in communicating with clients, asking questions, and seeking clarifications. Direct interaction is essential for effective due diligence. Document all client interactions, discussions, and meeting minutes.
Nominee directors should be cautious of requests that raise red flags, such as attempts to circumvent foreign currency restrictions, and promptly report any suspicious transactions to relevant authorities. In addition, they must not engage in any unlawful activities on behalf of the company and steer clear of activities that could lead to legal issues for the company or themselves.
In a recent reported case in December 2023, Xie Yong, a nominee director for 980 companies, faced legal consequences due to negligence in anti-money laundering checks. Xie was sentenced to four weeks in jail and fined S$57,000 as these companies were involved in money laundering activities.
