A nominee director is an individual appointed by business owners or shareholders to act as a director. They represent the nominating party’s interests on the board while upholding their duties to the company. Nominee directors may also represent a parent company or a lender.
Why use a nominee director?
Some business owners may not wish to appear on the public registry due to confidentiality reasons. In that case, they may elect a nominee director to represent the company. However, the authority over the business remains with the nominator.
Appointing nominee directors is most common in joint ventures where the parent company nominates individuals to serve on the board of its subsidiary.
Entrepreneurs who want to open a business in another country often require local representation to ensure legal and regulatory compliance. Appointing a nominee director is a common solution for establishing a foreign presence.
Roles and responsibilities
Representation of the nominator
A nominee director is primarily appointed to carry out the wishes and interests of the nominating party. However, if the nominator’s wishes present a conflict of interest with the company’s mission, the latter should be prioritised.
Fiduciary duties
Nominee directors observe the same fiduciary duties as de jure directors. This includes acting in the best interest of the company, exercising due diligence, upholding confidentiality and ensuring compliance with legal and regulatory requirements.
Participation in board activities
A nominee director must fulfil their role as a board member by participating in all board activities — attending board meetings, engaging in discussions and sharing insights from the nominator’s perspective.
However, their involvement is one of oversight. That is why they often serve on key board committees such as remuneration, audit and risk management committees.
Appointment process
A nominee director undergoes a similar appointment process as a de jure director. However, unlike a de jure director, who is typically appointed by the nomination committee based on board composition and strategic needs, a nominee director is proposed by a shareholder or shareholder group.
During the appointment process, the following documents are necessary:
An agreement containing key details about the beneficial owner and the nominee
The nominee’s agreement, indicating that complete control over the company belongs to the beneficial owner
The beneficial owner’s agreement, specifying the terms under which the nominee director holds their position
In some jurisdictions, a letter of resignation signed by the nominee director, undated
The power of attorney, stating that the beneficiary maintains full control of the company. This also varies by jurisdiction.
Legal and regulatory considerations
In the UK, there is no legal distinction between a nominee director and a de jure director. They are subject to the same duties under the Companies Act 2006 and must comply with the disclosure requirements, such as registering their personal information and submitting annual financial statements.Each EU member state has specific regulations for appointing directors, including nominee directors. For example, appointing a nominee director in Germany must be according to the German Limited Liability Company Act (GmbHG). This law outlines the general requirements for directors, including their duties and responsibilities, without distinguishing between a nominee and a de jure director.
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