Nominees are people or entities who are appointed to a company by the company’s controlling persons. They can be anyone, as long as they meet the requirements set out in the company’s articles of association.
There are several benefits and drawbacks of using nominees to form companies. One benefit of using nominees is that it can make the formation of a company easier and faster if the nominees have all the relevant documents required for the formation in place from the get-go. Another benefit is that it can help protect the privacy of the shareholders. A drawback of using nominees is that it can make the company more vulnerable to lawsuits. Another drawback is that it can make it more difficult to raise money from investors, due to a lack of transparency of who is behind a certain project.
The legality of using nominee services depends on the jurisdiction in which the company is formed. In some jurisdictions, nominee services are illegal, while in others they are legal.
Some Countries where nominee services are legal:
Australia, Canada, Hong Kong, India, Japan, Netherlands, New Zealand, Singapore, South Africa, United Arab Emirates, United Kingdom, Cyprus, Malta
Countries where nominee services are illegal:
Albania, Austria, Bahrain, Belgium, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Georgia, Germany, Greece, Hungary
Nominees can help avoid taxes in some cases. For example, if the company is formed in a jurisdiction where nominee services are legal, and the company does not have any physical presence in that jurisdiction, then the company may be able to avoid paying taxes in that jurisdiction. However, this depends on the specific tax laws of the jurisdiction in question.
Using nominees can help a company open bank accounts in some cases. For example, if the company is formed in a jurisdiction where nominee services are legal, and the company has substance in that jurisdiction, then the company may be able to open bank accounts without disclosing the identity of the actual controlling persons. However, this depends on the specific laws of the jurisdiction in question.
When it comes to the question of how the beneficial owners protect themselves when utilising nominees, and whether nominee agreements actually help to protect the true beneficial owners of the company, there is no definitive answer to this. Some practicians believe that nominee agreements do protect the ultimate beneficial owners, while others believe that they do not.
One argument in favor of the idea that nominee agreements protect the ultimate beneficial owners is that it can be difficult for someone to track down the actual shareholders of a company if the company is using nominees. This can make it more difficult for someone to sue the company or try to get money from it. Another argument in favor of this idea is that if something goes wrong with the company, the nominees can be held liable instead of the actual shareholders.
However, there are also arguments against the idea that nominee agreements protect the ultimate beneficial owners. One argument is that if someone really wants to find out who the shareholders of a company are, they can usually find out with enough digging. Another argument is that if something goes wrong with the company, the nominees may not have enough money to pay for any damages, which could end up costing the ultimate beneficial owners money.
In short:
Drawbacks of using nominees:
– The nominees may not have the best interests of the company at heart.
– They may be inexperienced or untrustworthy.
– There is a greater risk of fraud if the nominees are not properly vetted.
– If something goes wrong with the company, it can be more difficult to track down who is responsible.
Benefits of using nominees:
– It can be faster and easier to set up a company with nominees.
– Ease of bank account opening will improve
– Greater degree of anonymity
– Possibility to minimise tax-exposure
When looking to integrate nominees into a company, it is important to seek professional advice in order to ensure that the nominees are trustworthy and have the best interests of the company at heart, Roche Fintech has extensive experience assisting with the provision of nominee subscribers and directors for clients seeking to integrate nominees into their structures with varying levels of difficulty and regulatory burden.
