10 Reasons to Consider a Nominee Director for your HK Company

Facebook
Twitter
LinkedIn

As per the Companies Ordinance in HK, having at least one director who is a natural person is a requirement for the registration of companies in Hong Kong.

A violation of this statutory requirement will hold the company accountable for a fine of HK$100,000, and HK$2,000 each day for non-compliance.

Obviously, you don’t want to be penalized for non-compliance.

Still, you want to keep your interests, investments, and business associations confidential.

One of your best options is to engage the services of a nominee director for your company.

Table of Contents

What is the role of a nominee director in Hong Kong?

Business owners in Hong Kong who wish to remain incognito employ nominee directors and shareholders.

Note that the present legislation in HK requires the disclosure of personal information of company directors and shareholders.

role of a nominee director

This is where the nominee directors and nominee shareholders come in.

Nominee directors and shareholders in HK serve as a stand-in to protect the identity of real company directors and shareholders.

The nominee director will perform non-executive duties as per the instructions of the company owner. However, his primary role is to help keep the personal information of the actual company director completely confidential.

Some of the specific duties of nominee directors include:

  • administering and managing business issues
  • opening of bank account for the business
  • entering into contracts
  • collecting of debt

Advantages of using nominee director services

By using nominee director services, you can protect your privacy and prevent the disclosure of your personal details.

You can avoid getting your name, address, and ID card numbers known to the public, while maintaining complete control of your business operations, bank accounts, and other managerial duties.

In addition to keeping their personal details confidential, overseas investors can benefit from the use of nominee services in terms of tax savings.

The profit gained from HK firm operations can be taxed, depending on tax regulations in the investor’s home country. The investor can nominate a director to avoid these tax charges.

Advantages of using nominee director services

Disadvantages of using a nominee directors

Nominated directors can perform the same roles and obligations as regular directors. They can be in charge of the firm’s statutory records and fillings, as well as hold annual meetings.

You would like to weigh the benefit of employing nominee directors with that of its drawbacks.

Note that assigning a stand-in to act as a director is rather complex, and may lead to several disadvantages.

It may expose the nominated individual to risks and repercussions associated with highly speculative business ventures.

Nominee directorship can also disrupt the normal flow of operations when the assigned director refuses to act on your behalf.

For instance, after weighing the merits and consequences, nominees may refuse to add their signature to any document.

Moreover, the Hong Kong Monetary Authority recommends stricter bank opening requirements for entities with nominee structures. Note that both resident and non-resident companies in Hong Kong are required to open a bank account to undertake any business

How do I assign a Nominee Director?

Typically, business owners appoint a stand-in director through an enforceable contract known as the service agreement.

However, you can also choose to go through a nominee service provider, who will negotiate and nominate a director for you.

Note that a nominee is mandated to return control of the firm should the real director or business owner so demand.

For the security of business ownership, the processes of nomination, assigning of rights, and possible cessation of service calls for the preparation of agreements and documentation.

Below are the documents you want to prepare and sign should you wish to engage a nominee service:

Statement of nominee director

This document confirms the service agreement between the company owner and the new nominee.

It specifies that the owner authorizes the nominee to represent the firm and to act and perform duties on behalf of the genuine director as specified in the agreement.

For example, after appointing your nominee, you will have to draw up an agreement, which states that your nominee can only act upon your instructions.

The appointed nominee can start working on his role as a director after both of you have signed the agreement.

The name of the nominee will be listed in your company’s documents and the search record of the Companies Registry.

Statement of nominee director

Power of attorney

You will need the power of attorney to designate authority.

This legal document spells out the nominee’s rights, such as the right to administer, present documents for the opening of a corporate bank account, collect debts, and perform duties on behalf and under the request of the business owner.

Letter of resignation

The letter of resignation serves as an assurance that the registered owner retains control of the business.

The nominee is therefore required to sign a resignation letter bearing no date before the commencement of his duty.

The directorship will be handed back should the business owner decide to terminate the services of the former.

Declaration of trust

The main reason for the employment of a nominee is to protect the identity of the company owner, while the business proceeds with its normal operation.

This calls for the signing of the declaration of trust, which stipulates the commitment of the designated director to never publicize personal information.

Cost of nominee services

Just like other business considerations, the appointment of a nominee for the corporation comes at a cost.

You may want to request an appointment with firms that provide nominee service to clients so you can be sure of the payment involved before committing to the service.

Cost of nominee services

Bank account opening with nominee structure?

Any form of business entity, including a limited company registered in Hong Kong is required to open a business bank account.

However, nominee directorship may pose an issue with opening bank accounts for business, especially as financial institutions in Hong Kong are cautious about allowing companies to use nominees.

Most banks interpret the element of secrecy as a highly concerning matter that can be associated with tax evasion and money laundering schemes.

FAQs

Who can appoint a nominee director?

The business owner can designate the director through a service agreement. This agreement states the circumstances and instructions associated with the nomination.

Is appointing a nominee director legal in Hong Kong?

In recognition of the request of company owners to keep their personal details confidential, the law allows the designation of directors.

What is the difference between a shadow and a nominee director?

Employees typically comply with the instructions of a shadow director, as they are regarded as one.

However, they do not have binding authority in relation to the company, and they do not benefit from statutory protection just like the regular directors.

A nominee director is a non-executive director, whose designation is mainly for the purpose of protecting the identity of the actual company director.

What is the difference between a nominee shareholder and a nominee director?

A nominee shareholder refers to an individual who lends his identity so he can act as one of the registered owners of your company shares.

He holds the shares under a secret arrangement.

So, under this arrangement, he would appear as the real shareholder, but you retain the rights of ownership to the company shares.

Should I allow the nominee director to help manage my company?

You might want to see how your nominated director can help in the growth of your company. Allowing him more control in the management of your business may ensure that he fulfills his necessary duties.

What is a nominee director service in Hong Kong?

This is a form of a legal agreement between a beneficial owner and the designated director.

Wrap Up

Engaging nominee services helps the beneficial owner to ensure normal operation and security of personal information of directors and shareholders.

Are you looking to appoint the right nominee for your company?

Contact us so our specialized team at ReachTop KSHK can guide you through the process and clear up your doubts about engaging a third-party director.


Contact us for a free consultation

Book Your Free Consultation

All consultants are qualified Hong Kong company accountants and tax advisors.