Offshore Business Secrets: Nominee Services as Ace up Your Sleeve

Nominees are often a necessity if you are about to do business offshore. The reason behind this is pretty simple: many offshore jurisdictions do not allow non-residents to establish companies or set up bank accounts. In this situation, applying for a residence permit is a viable alternative. However, it is a demanding and lengthy process, burdened with rigorous stipulations. For entrepreneurs who require the most efficient solution, the ideal approach is to benefit from the nominee services provided by Offshore Pro Group. This strategy guarantees a seamless and effective completion of all necessary offshore procedures.

What are nominee services all about?

The essence of nominee services is that individuals are appointed to significant roles in a company (e.g., managers, directors, and executives). These roles come with a specific limitation: no decision-making authority. The appointed nominees’ details are recorded in corporate documents and government registries, shielding the identity of actual business owners and managers.  

Such services are instrumental in simplifying the incorporation process for non-residents, as they allow foreign company founders to establish businesses in stable jurisdictions that are so attractive to potential partners and investors.

Nominee managers and their responsibilities

With this service, you will benefit from various competencies.

Director (Manager) 

It is an international standard that for your business to be registered, you must appoint a company director regardless of the jurisdiction. A nominee director represents the company’s interests before government entities and deals with counterparties. They are not, however, accountable for the owner’s managerial decisions or the company’s strategic development.

These are the documents that establish the director’s competencies and powers:

• General Power of Attorney
• Trust Agreement
• Statement of Resignation
• Nominee Shareholder Deed.

A nominee director primarily ensures adherence to local laws, signs documents, and opens bank accounts, which can be challenging for non-residents in countries that require directors to be citizens.

Secretary

Just as with directors, secretaries are appointed to meet the legal requirements of a particular jurisdiction. In Singapore, Panama, Hong Kong, and Cyprus, you won’t be able to incorporate a company if it has no secretary. Here’s what the secretary is responsible for:

• managing accounting records
• drafting reports
• recording meeting minutes
• performing various administrative duties.

Shareholders

Either resident individuals or legal entities, nominee shareholders are appointed by the actual beneficiaries in control of the company’s assets. The extent of the shareholders’ competencies is determined by the corresponding trust agreement.

Non-residents shy away from nominee services: here’s why

Typically, you may come across nominee directors, managers, or secretaries whose duties are contractually defined. Although it is the nominees’ information that is recorded in all corporate and governmental documents, the actual company owner is the one ultimately responsible for the company’s commitments. 

Please note that nominee services do not offer absolute anonymity for the owner’s data. In most countries, disclosure of the true owner’s identity is required during audits, investigations, or legal actions. There are also some other disadvantages associated with the use of nominee services. 

Limited control 

The use of a nominee imposes certain constraints on the business owner’s ability to manage day-to-day activities and business workflows, as this is now done by the nominee manager. While the owner can delegate any tasks within the manager’s contractual scope, instances requiring the owner’s signature will demand personal attention and time from the owner.

Potential risks

Business owners make all important decisions but often rely on third parties for management, which carries the risk of inadequate performance that could adversely affect the business. 

To avoid legal complications, such as untimely reporting or non-compliance with corporate laws, always watch out for fraud.

Bank account establishment may also be potentially challenging. In certain jurisdictions, financial institutions insist on the actual signatory’s in-person appearance and full disclosure of beneficiaries. What is more, companies that use nominee services may be categorized by banks as having a heightened risk for money laundering.

Extra expenses

Nominee representatives’ expertise directly influences the cost of their services. As companies differ in their offerings, so do the associated costs. 

Yet, despite the evident challenges, nominee and manager services are popular with non-residents who continue to use them for a variety of reasons.

Nominee services: key advantages

Here’s why using nominee services is a wise decision for a non-resident business owner:

• Compliance with Local Laws: Nominee services enable business owners to meet the legal requirements for company registration. In jurisdictions where a director must be a local citizen, nominee services are vital.
• Enhanced Confidentiality: Nominee services are useful for keeping the owner’s personal data confidential. This is particularly advantageous in jurisdictions with publicly accessible shareholder and director registries, like the UK and Hong Kong.
• Lower Tax Burden: In states like Cyprus, a company’s tax benefits are directly related to its status as a resident entity. Therefore, offshore companies are often managed by nominees.
• Conflict-Free Documentation: Nominee services are a solution for owners with several offshore companies. It is due to them that nominees can sign intercompany contracts with no issues.

Why do businesses use nominee services?

With nominee services, business people can resolve a number of issues a lot more efficiently:

• Simpler Offshore Business Formation: Nominee services play a vital role for businesses looking to set up or expand into offshore jurisdictions. They address the legal requirement for local residency of key company personnel, thus facilitating the registration process through the designation of local nominees.
• Protection of Personal Reputation: The use of nominee services allows business owners to remain anonymous, which is essential for protecting their personal reputation. This anonymity is particularly beneficial if a new business venture fails to succeed.
• Remote Business Management: Nominees who act on behalf of the company owner can handle issues that require the latter’s personal presence, such as negotiations with business partners or communication with state regulatory authorities.

As part of nominee services, you can enjoy consultations on tax and legal matters, assistance with company incorporation, accounting services, and other essential business supports for an additional fee.

Nominee services: minimizing the associated risks

It is true that nominee services are a useful tool to successfully resolve certain offshore incorporation issues. Still, some risks persist, and here’s what you can do to mitigate them:

• Pick nominee service companies that have a proven track record of reliability and professionalism.
• Execute comprehensive contracts with nominees. To avoid any ambiguity, these contracts should explicitly define their roles, authorities, and responsibilities.
• To protect your company from potential legal challenges, insure the officers’ liability. This is your safety net against lawsuits.
• Have an undated pre-signed resignation letter from the nominee on hand. Should they not meet your standards, this allows for immediate termination of their services.

Summing up: are nominee services a good idea?

In some offshore jurisdictions, a key requirement for business registration is that one of the company’s managers must be a resident. This may be a significant obstacle for foreign entrepreneurs who wish to start a business abroad.

Nominee directors and managers are instrumental in maintaining the anonymity of company owners. They represent the beneficiaries’ interests and guarantee compliance with the offshore jurisdiction’s laws. Despite potential risks, the protective and compliance benefits of nominee services generally outweigh their drawbacks.

Do you need a complete set of nominee services or have any questions about them? Offshore Pro experts are here to give you a hand! We will handle all company registration issues, including the appointment of managers, tax system optimization, and bank account setup. You are welcome to benefit from nominee services while retaining control of your company and assets. Not to mention that your reputation will remain squeaky clean. Would you like to make it all possible? Just give us a call!