Nominee shareholder Singapore law: Many people when doing business in Singapore have many reasons why they do not want to be named as a shareholder of a company. Some of these reasons include, potential conflicts of interest with their existing jobs or not wanting to appear in the shareholding table of a company for business reasons, for example when the company does business for a counterparty that the person may be on bad terms with.
This article will go through some key reasons why you need to appoint a nominee shareholder under Singapore law, how to appoint a nominee shareholder and how to protect your interest as a beneficiary.
#1: Why appoint a nominee shareholder Singapore law
One of the key reasons for this is tax. If you are from a high tax country like Russia or the USA, you should seek tax advice on how to manage your cross border business affairs. The use of nominee shareholders is used in such cases provided that: (i) you can trust the nominee shareholder (i.e. that there is no reason for him to transfer away/abscond with your property – you mitigate this risk using professional parties to be the nominee shareholder); and (ii) you have adequate legal documentation drafted to protect your beneficial interest in your shares in your Singapore company.
What are the risks of appointing a nominee shareholder Singapore law?
- What happens if your trustee/nominee passes away?
You need to bring the deed of nomineeship to the executor of the estate of the trustee and get back your asset. We would suggest appointing a lawyer to do this for you as you may not be familiar with the process of intestacy and probate.
- What happens if your trustee becomes insolvent or bankrupt?
If your assets are worth something, you will need to appoint a lawyer to go to court to direct the liquidator or the executor of the bankrupts estate to return your asset to you. If you fail to do this, the liquidator may sell of your asset and hold the cash proceeds received for the bankrupt’s estate.
#2: How to appoint a nominee shareholder singapore law
Some people get their trusted friends to be the nominee shareholder, others get a professional firm like a trust firm to be the nominee shareholder. The suggestion is to see what is the value of the shares being subject to this nominee shareholder arrangement. If the value is less than the cost of getting a professional firm to do it, then you can ask your friend to be the nominee shareholder for you provided you get adequate documentation drafted for this purpose.
#3: How to protect your interest as a beneficiary
The process for appointment a nominee shareholder under Singapore law are as follows:-
- Ask your corporate lawyer to draft a deed of nomineeship for you, some key terms you need to take note include:
- Who exercises the voting rights in respect of such shares? Does the beneficiary get to direct the nominee shareholder to vote in accordance with its instructions?
- What happens to the dividends received in respect of such shares? What about personal income tax of the trustee? The trustee has to pay tax on such dividends first before paying the balance to the beneficiary.
- You would need to ask your company secretary to pay stamp duty on this deed of nomineeship and stamp it at the tax office
- After 1MDB, your Singapore company secretary will also have to fill up your name in the register controllers and beneficial owners.
In conclusion, appointing a Nominee shareholder Singapore law while necessary as part of business needs to be done correctly from the point of view of the beneficiary otherwise you can risk losing your shares to the trustee/nominee that you appointed.
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