A registered shareholder is when the beneficial (real) owner records his/her name on the share certificate and in the Register of Shares as the owner of the allotted shares.
A nominee shareholder is when the beneficial owner chooses not to have his/her name on the share certificate or in the share register; we supply a third party to be the nominee for the real owner. The nominee appears on the certificate and in the register, in return the nominee signs a Declaration of Trust to the beneficial owner giving up any right to exercise any powers over the shares including voting rights or the right to sell or transfer these shares.
The nominee shareholder is used where the Companies Registry may be open to public scrutiny or if the owner requires a deeper sense of privacy. Our company offers this service free of charge.
Formation of Nominee Shareholder
As the name implies, nominees are simply some person put there for no particular use, and they have no role to play in the company business. But because they are named in the business enterprise, it is required to pay them the monthly salary amount as fixed by the agreement.
While forming an offshore company, there is usually more than one person involved and take up the posts of directors, shareholders, and partners. The number of people involved will vary depending on the size and type of business. For limited liability companies, shareholders would be replaced with partners and in such a situation, nominee partners are inducted into the system.
Nomination of a Nominee
A person is randomly selected based on mostly trust reasons to play the role of the nominee shareholder, director or member in the business. There are several agreements maintained with the nominee, and one of the most prominent clauses is that the owner of the company holds the supreme power to release the candidate from his position at any time when it may be required. This owner is the ultimate beneficial owner and is the original owner of the business. Problems arise in legal documentations and implications when this nominee holds true partnership, shares or membership of the company. But as per legal rules, the nominee will not have any powers and has no right to implement any actions without the instruction of the owner.
Things to Know Before Opting a Nominee Shareholder
Several misconceptions are circulating about nominee shareholders and offshore companies as a whole.
Nominees are not resident managers: Some establishments make the mistake of appointing citizens as candidates so that they can serve as resident directors. By selecting a resident of that state where the offshore entity is incorporated, towards the post of the nominee, it is not possible to gain the benefits of being a resident company. It becomes necessary to obtain the accession as a resident business so as to avail double taxation agreements and other benefits legally made available to the resident companies.
For resident benefits its required to hire resident managers from the local areas and they are more expensive than the nominees. Offshore enterprises established in Cyprus, Maldives, and Malaysia, are the ones who pay vast sums to such resident managers to avail the greater benefits of tax and legal issues
In most cases, when the nominee shareholder is entrusted with the job of being the bank account signatory, it will be required to pay extra charges for the same. Nominee shareholders are usually not included in the bank account signatory list due to these charges and mostly the risks associated.
Placing Nominees as Bank Account Signatories
On opening an offshore company, the primary step before beginning operations is to initiate an account in the name of the company in the resident state. The bank will then require having one or more people as signatories to the bank account who will have complete control of the banking details. All transactions with the bank from the company will require being signed by these signatories.
In the majority of the offshore businesses, the owner of the enterprise will be the sole signatory of the bank account. This gives the owner or owners the complete control over the funds in the bank account of the enterprise. When a nominee is placed as the bank account signatory, the bank will not know about the real business owner. Bank mostly require transparency and would not tolerate that they are not knowledgeable about the original business owner and accept the nominee as the signatory. There are international standards of compliance to be followed by the companies when it comes to banking interactions. It will require disclosing the original owner to the bank.
Problems of using the Nominee as a Bank Account Signatory
The bank account of the enterprise is the medium through which all monetary transactions take place. Without the owner's name as the signatory, the nominee will have full-fledged powers over the bank accounts. Mostly nominee shareholders who double up as bank account signatories become essential elements of the business, and their signature is required for every other fund transaction. They usually charge extra for signing on banking files and operations. This means, for every transaction, the business will have to bear the bank transfer fees and also the amount of the nominee.
One of the major issues with placing the candidate as the signatory lies in the risks of handling the funds. The nominee being from the resident country, it would be near to impossible t0 try to sue them in this regard as they have the sole rights to the funds as per the bank documentations which place him as the owner of the business. The maximum proceeding that can be done is filing a civil case.
Need for a nominee
A candidate cannot be used by the owners to remain undercover from the government. They can provide as a safety measure to stay away from the limelight of the business. Nominee shareholders are chosen by people who do not want to reveal their assets to the public.
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