Nominee services, advantages of nominee services, Legal grounds for nominees

Nominee services

One of the advantages of using nominee services - is protection of assets, therefore, the confidentiality clause is extremely important.

Nominee services are usually provided by an intermediary in order to hide the beneficial owner’s business. Nominee services are related to nominee shareholder and nominee director. In the regular situation the nominee services should also involve a post box service (office address for correspondence purposes). Nominee services are suitable for large corporate structures for tax planning purposes and frequently involve international element. For instance, the ultimate beneficiary is based in other country rather than the company itself.

Nominee shareholder services are usually carried out basing on declaration of trust, whereas the nominee declares that he holds shares on behalf of other person and he is not entitled to make decisions in the company, to neither vote at a meeting of shareholders, nor receive dividends, unless specifically instructed by the client. The nominee has no rights to sell shares unless required by the client. However, the client and nominee may agree on specific duties that the nominee should carry out. Such duties are often assigned to lawyers and attorneys at law that are professionals in the field and may protect the client`s interest.

Nominee director also called 'shadow director', who usually appears only for official records, whereas the company is virtually governed by the client by power of attorney. On the basis of authorization the client may open a bank account and acquire full company management and control.

Advantages of nominee services

The advantages of using nominee services appear in cases when a businessperson wants to keep his privacy and decreases the visibility into official records or does not want his name to be associated with the concerned company. Moreover, there can be a situation, when a person has restrictions to exercise the planned activity or when the law requires a local management, for example, a local secretary in Hong Kong.

When a quick action is necessary to register a company abroad, in case the client cannot travel, it is often more convenient to temporarily appoint a local company manager. If the intention is to open a company in overseas jurisdiction, such as BVI, Belize, Hong Kong, it might be physically complicated to arrive in person.

Nominee services usually guarantee confidentiality and anonymity. However, a disclosure sometimes happen at bank or in investigation authorities during court proceedings.

The nominee services are widely used for tax planning and asset protection purposes. If ultimate beneficiary of completely corporate structure is based in low tax countries, he should enjoy the benefits of low tax system for the received dividends from the earned profits.

Other advantage derives from the registration country and is often referred to financial statements and reports. In some tax haven jurisdictions there is no need for submitting the annual, therefore, low auditing and bookkeeping requirements that provide certain advantages, if the person is willing to increase privacy and confidentiality and hide his/her assets.

Legal grounds for nominees

Nominee services are established under agreement between the client and nominee. Agreement is usually valid for one year and can be prolonged in case of successful co-operation. The documents that will approve the actual status, serves as the declaration of trust signed by nominee shareholder, approving that he/she has no actual interest in the company and all decisions will be made by the client, including, but not limited to sharing profits and paying dividends, appointing company board, etc. The nominee director should issue a power of attorney by giving full power to the actual owner or to any other person upon client`s choice. The nominee director does not actually run the company.

The agreement concluded between the client and nominee is governed by the local civil law. The nominee concept historically comes from the bank law as a specific service for bank clients. Nowadays, many jurisdictions offer such service as a business and the provisions of such services stems out of customary law combining the best practice worldwide.

Liability of the nominee

Nominee bears full responsibility for his/her actions and the client holds him/her accountable at all times, nominee should act only in accordance with the client’s instructions and given assignment in good faith and with a high level of loyalty. The provisions of liability can be regulated by the agreement.

However, the nominee status does not change the statutory liability and state authorities hold him/her accountable for his/her actions as a company officer, including civil, criminal and administrative liability. Also, nominee is liable to the client according to the content of the agreement and given assignment.

In low tax jurisdictions, the nominee services are usually well-developed and the liability is more flexible. Anyhow, the nominee cannot perform any actions against client’s will.

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