With Singapore’s pro-business environment, it is no wonder that many foreign entrepreneurs choose to start a business here. It is worth highlighting that as part of the company incorporation process, the Singapore Companies Act stipulates that every company must have at least one director who is ordinarily a resident in Singapore.
This resident director should be holding one of the following; Singapore citizenship, Singapore permanent residency, EntrePass or Employment Pass permit.
To this end, here is a quick look over the benefits and risks of engaging a Singapore nominee resident director service company.
What is the role of a resident director?
The Singapore Companies Act defines a director as someone “with whose directions or instructions the directors of a corporation are accustomed to act and an alternate or substitute director”. As mentioned earlier, the director must be a Singapore citizen or hold Singapore permanent residence, EntrePass or Employment Pass. The director must also have a local residential address.
The key responsibilities of the director are being accountable for the statutory books and filings, accounting records and annual accounts, as well as holding the shareholders’ and directors’ meetings. The director also has fiduciary duties which include ensuring good corporate governance, practicing corporate social responsibility and adopting ethical and socially responsible practices.
Should the director fail to uphold his duties, he is penalised and punishable by law. It is to be noted that the bulk of the company’s powers lie in its board of directors that is in charge of the company’s affairs and is answerable to shareholders.
What is the role of a nominee resident director?
The Singapore nominee resident director fulfils the same obligations and responsibilities as a regular Singapore resident director in line with the Companies Act and the common law.
For a foreign entrepreneur who is not based in Singapore, choosing a Singapore nominee resident director will allow him to meet Singapore’s company law requirements. As a cautionary advice, it is very important to choose a trustworthy individual for the role.
What are the advantages of having a nominee resident director?
The foreign entrepreneur has peace of mind that he has fulfilled the company law requirements while he does not have to be physically present in Singapore. Appointing a Singapore nominee resident director also offers advantages such as having a director-level representative to handle such tasks as getting financial paperwork in order, having licenses or registering with government organisations.
What are the risks of having a nominee resident director?
Getting an individual to fulfil the role of the Singapore nominee resident director contains certain risks. For instance, the person holding such a position has the power to make strategic decisions on management and operations matters of the company, as well as communicate with clients and government bodies. It is therefore useful to have a professional corporate services firm provide a Singapore nominee resident director.
Why should you engage a nominate resident director from a professional service?
Engaging a nominee resident director service in Singapore gives the foreign entrepreneur peace of mind. This is because an agreement is made between the service firm and the client, stipulating the director’s role and certain restrictions regarding his authority in the client company.
Having this agreement, the foreign entrepreneur will ensure to have the final say in decision-making. In addition, there will be business continuity even when the nominee director ceases to fulfill his role as the professional services firm will appoint another nominee director in accordance with the Companies Act.
How to know more about the compliance requirements of a director?
The Accounting and Corporate Regulatory Authority (ACRA) has introduced a Directors Compliance Programme this year with the aim of informing directors about their roles and obligations, allowing them to be transparent with the company’s stakeholders and be in line with legal requirements. The topics covered in the programme include fiduciary and statutory duties, penalties for non-compliance, as well as reporting, filing and other administrative requirements. Rather than prosecuting directors who have made a first-time offence, this ACRA programme educates them with the appropriate training on compliance requirements.
Engaging a nominee resident director in Singapore is a good decision for foreign or first-time entrepreneurs who want to ensure effective corporate compliance from the very beginning of their business journey. However, it is not completely risk-free since finding a trustworthy individual is not an easy task. If you have decided to engage a nominee resident director, AM Corporate Services is here to guide you with professional advice and help you find the right service for your company. Contact us now for consultation!