Nominal Services
We have the ability to provide nominal service, but you will be brought up to speed before you use this service.
INFORMATION WHAT IS NOMINAL SERVICE?
Nominal Service
Nominee owners and managers are often used in international corporate structures and offshore companies. But how legitimate is it?
A nominee director? Is it legal?
The concept of “nominee service” is not used in all countries and can be interpreted slightly differently depending on the jurisdiction. In many countries nominee service is not officially allowed, but in other jurisdictions it has long been used successfully.
NOMINEE SHAREHOLDER OR DIRECTOR
Nominee shareholder (owner) and nominee director are concepts that are often used in corporate law and are related to the use of nominees as representatives of the real owners or directors of companies.
We would like to separately note that a nominee owner, despite the fact that information about him or her may be entered in various registers, including the trade register, financial and other reports of the company, does not have the rights to vote at shareholders' meetings or receive dividends, but may perform other functions, such as managing the register of shareholders and holding shares on behalf of his or her clients. In effect, the nominee acts as a representative (agent) of the real shareholder.
The nominee director may even manage the company in a sense (within the limits of the powers granted to him), in some cases the nominee director may travel to meetings, manage finances, etc. But most often, the functions of a nominee director are reduced to mentioning his name in corporate documents and registers, signing documents on behalf of the company on behalf of the real beneficiary. It is important to realize that the nominee (unlike the real one) director does not independently make any decisions concerning the company's activities.
Nominee service can be provided to many companies at once (in Russia such shareholders/directors would be called “mass”).
WHO NEEDS IT AND WHY
As a rule, nominee service is used to ensure confidentiality and anonymity of the real owners/directors, as well as to simplify the company registration procedure.
By the way, some jurisdictions require at least one director to be a resident/citizen of the country. Obtaining citizenship is a very complicated and time-consuming process, so it is easier to use the services of a “nominee director” to start a business.
It is important to remember that using a nominee service does not relieve the real owners from responsibility for the company's obligations. In addition, it does not give a 100% guarantee of confidentiality, in some cases, for example, if the company becomes the subject of an investigation or litigation, nominee owners may be forced to disclose information about their clients.
In addition, nominee services may include legal and tax advice, company incorporation and maintenance support, and other additional services.
WHO CAN BE A NOMINEE SHAREHOLDER OR DIRECTOR
A nominee can be an individual or a legal entity. More precise requirements depend on the jurisdiction (e.g. citizenship/residency, attainment of a certain age, work experience, permits, etc.). Such services are usually paid annually or a one-time fee is charged for nominal shareholding.
Typically, an agreement, trust deed/declaration, is entered into between the real owners and the nominee shareholders. It may specify the following matters:
- The amount of remuneration to be received by the nominee owner/manager for his services;
- The term of the agreement;
- Rights and obligations of the real and nominee owners, nominee manager;
- Mechanism of transfer of shares or stakes of the company owned by the nominee owner, beneficiary;
- Possibility and conditions of termination of the agreement, etc.
RISKS OF REAL OWNERS WHEN USING NOMINEE SERVICE
Let's single out several groups.
Risk of loss of control over the company.
When using a nominee owner, the real beneficiary may lose control over the company if the nominee owner decides to sell his shares or transfer them to another person without the consent of the beneficiary. But in practice, this does not happen as often as it may seem at first glance. As a rule, agreements are concluded between the nominee and the real owner, declarations are signed that define key points and protect the interests of the parties. Also, nominees usually sign resignation/transfer of shares to the real owner (undated form). In addition, the bank has information about the real owner, which means that access to the accounts is not easy to obtain.
Risk of dishonest behavior of the nominee owner, risk of loss of reputation.
The nominee owner may use his position to gain profit at the expense of the company, violating the interests of the real beneficiary. As we wrote above, these risks are minimized in case of a properly executed relationship.
Risk of legal problems
The use of a nominee can create legal problems if the company or the nominee does not comply with the laws and requirements for disclosure of information on beneficiaries, as well as in case of detection of violations of tax and corporate laws.
Risk of refusal to open bank accounts
Some banks may refuse to open an account for a nominee-owned company because they may consider it to be an increased risk with respect to financial fraud and money laundering. Some banks will refuse to serve such customers even if a current account has been opened previously.