Nominee Director Services Drying Up – Times Are a’Changing

Are you searching online for someone to be your nominee director? Probably having more trouble than in the past if you have done something like this before. While we at Global From Asia have never offered this service, we are fully aware of it – and also hear less and less agencies offering such a service.

Why?

Read on today and we’ll share our insights and experience on why.

First off, maybe you’re not familiar with what a nominee director even is. There is the long and roundabout way of explaining it – but let’s be more direct.

It is a service where someone else is your company director – not you or one of the “real” stakeholders. Maybe a company secretary or accounting firm partner will put their name on the dotted line in your company formation to be the director of the company.

Why would someone want this?

A company director is the responsible person for ensuring that the company follows the rules of the Hong Kong company registry. They are the liable person if the company is negligent or doing things in violation of the company director requirements.

This director doesn’t only apply to Hong Kong companies, most jurisdictions require a person to be the responsible INDIVIDUAL behind the company.

That is another good way to say it – the director is the responsible INDIVIDUAL behind the company. A company, by definition, is a separate entity to protect the owners from liabilities that the company may incur while doing business. But there still needs to be someone ultimately responsible, at least in Hong Kong, and that is the company director.

Some business owners prefer not to put their own name here, and want a third party to do it. Thus the longer explanation of what a nominee director is.

In years past, you would be able to simply do a Google search and find a load of companies offering nominee director services. It wasn’t such a big deal. But in 2016 this has gotten harder and harder.

Why?

Because all of these horrible scandals around the world. From terrorist attacks to money laundering to the Panama papers leak – the company directors are ones who get the brunt of the headache when a illegitimate company is uncovered.

So how do you put a simple price online for the risk and liabilities to offer a company you don’t know to be their company secretary.

While this service may exist, it is more common when it is a more close relationship. The agency will want to know the company owners much more closely. They will want to be much more aware and involved in the daily operations of the business. And probably get a regular payment for such a service – potentially even as a salaried staff.

Even with those precautions, it is a risky position to be in. The nominee should have rights to access bank information and other details of the company to ensure that the company is not doing any risky business that could come back to the director later.

As they always say, there isn’t a problem until there is a problem.

This question from a reader would best show that a lot are seeing that it’s getting difficult to find a nominee director in Hong Kong:

It is a common request to ask for a nominee director, and it was one that was quite common in Hong Kong until the 2016 timeframe. At that time, the HK government really cracked down on shell companies and using fake people to be the liable director.

On top of that, those who were nominee directors could be liable for quite a bit of risk if that company were to ever do something. So that would be the short and easy answer as to why.

So what is my advice? Stop searching for a nominee director service. Why are you looking for such a service ? I have heard a few reasons

A) It is for tax purposes in your home country. Sometimes if you are the director of the company in a foreign country, you need to pay more taxes in your home country.

B) You don’t want your personal name on the company. This one, I maybe had the feeling when I first started business as I was afraid of random people on the internet being able to track me down about my business. But really, this is part of doing business. You need to stand behind the company you make.

So really, I feel you need to “own it”. Be the company director. Make sure the company is going along following the books and doing things correctly.

What are your thoughts? Think I am crazy to tell people to actually be the director of their own company? Let me know in the comments below.

We still get quite a few requests for a nominee director service. While we can’t directly help you, we have sourced some options for you from other partners in Hong Kong. It is on a case by case basis depending on your profile, so please contact us for more details.