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Every Singapore-incorporated company needs at least one local resident director. Foreign promoters intending to incorporate their companies in Singapore usually resort to availing nominee director services from professional firms in Singapore. However, some foreigners appoint their friends or relatives in Singapore as nominee directors of their Singapore companies to save on expenses. Is this arrangement allowed and worth it? Let’s discuss the most important factors to consider regarding this matter.
If your friend or relative is a Singapore citizen or permanent resident, then he or she is eligible to be the nominee director of your Singapore company. Otherwise, the following kinds of visa make him or her ineligible for nominee directorship:
Nevertheless, an exception to this rule is that EP or EntrePass holders are eligible for directorship role for their respective companies only. They cannot act as local or nominee directors of other Singapore companies other than the one which sponsored their visa.
If your friend or relative is a Singapore citizen or permanent resident and is eligible for nominee directorship, then the next question you have to ask yourself is if his or her current employment contract would allow him or her to be appointed as a director of another company. Hence, you need to review his or her existing employment contract.
A sample employment contract states that: “You may not, during your employment engagement, be concerned, undertake, or be interested in, whether directly or indirectly, or be associated with any other company, without the prior consent of the Company, become an employee, director, agent, or partner of any other person, firm, or company.”
In this sample, it is clear that asking permission from the employer is required before your friend or relative accepts the role of a nominee director. In most instances, multinational companies, reputable organizations, and most of the employers will not give their permission.
Being a nominee director of a Singapore company entails risks, unexpected expenses, and consequences that your friend or relative may not be prepared for. These things may not necessarily happen in your company, but you may forget an important compliance that may require your friend or relative to a training attendance at ACRA. Would he or she be willing to do that? There will also be times when he or she might get fined for forgetting to file a company document such as a tax return. Would that circumstance not affect your relationship?
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