Everything you need to know about
and how to get one!
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What is a nominee shareholder?
A Nominee Shareholder is simply a person designed (or “nominated”) as a shareholder of a company instead of someone else. That person can be a natural person or a company.
Why use a Nominee Shareholder?
There are a number of reasons why you would need a nominee shareholder:
- legal requirements (you need to be 2 or more persons to create a certain type of company, or only shareholders of a certain nationality are are allowed)
- facilitate the buying or selling (of shares?) for clients (as sometimes stamp duty can be due)
- ease the local administration or local management (faster than remotely)
Does it work everywhere?
- in some jurisdictions the Ultimate Beneficiary Owner (UBO) or the Person with Significant Control (PSC) has to be disclosed. Sometimes they are published on a public register (like in the United Kingdom).
- most banks require to know the UBO or PSC thus it will need to be disclosed.
Whom can be a nominee shareholder?
It depends on the jurisdiction:
- in some countries it is completely free (like the USA), with the only requirement of being an adult
- in some other countries it is (heavily) regulated: you would need to be authorised & approved, or be of a specific (legal) profession, or be an authorised company, or be licensed one way or another.
Is there any risk?
Yes there are many risks surrounding nominee shareholders.
The Nominee Shareholder needs to be a trustful person because it represents a legal owner of a company, and as such as power to do things with that company (like resell the shares, access the company bank account, etc). This is of course illegal and it is a breach of trust.
On the other hand: there is a risk for a Nominee Shareholder to act as a Nominee if the company is engaging into illicit commerce.
To mitigate those risks: the customer assesses the trustfulness of the Nominee Shareholder, and the Nominee Shareholder assesses the risk of its customer. A contract (Nominee Shareholder Agreement) is usually signed as a the legal proof of service.
What is a Nominee Shareholder Agreement?
Also called a “Deed of Trust” or “Declaration of Trust”, a Nominee Shareholder Agreement is a private contract which sets the details and scope of actions of the Nominee Shareholder. It is the only legal proof that the Nominee Shareholder is acting on behalf of someone else.
Is there any TAX IMPLICATIONS?
Usually the Nominee Shareholder is considered the legal recipient of the dividends (if any), thus the tax implications fall in the Nominee Shareholder’s hands.
Is there any alternative?
When possible: a new company could be created (in another country), and this company could then act as the needed shareholder (in the other country). But that increases costs considerably, or sometimes it is not legally permitted (because some countries could require to have only natural persons).