If you are doing business through a UK company but do not wish to be formally appointed and registered as a director, for reasons of privacy, convenience or otherwise, you may choose to use a nominee director (see our previous note ‘ Nominee Directors – making the right appointment ’). If you choose to take this path, we will now introduce how it operates.
It is worth noting, firstly, that any reputable provider of nominee services will require the full details of the business owner. They will also wish to know the nature of the company’s business and the reason for wishing to use a nominee (and most of them will not provide nominees for cryptocurrency or financial services companies.)
If a nominee director is to be appointed, a clear and comprehensive Contract between the nominee and the owner will be essential to define that the owner will take all business decisions while the nominee will act only in accordance with instructions. The nominee will sign all forms and documents that legally require the signature of a director and may agree to carry out administrative or representative tasks as defined. In the UK the nominee as director will be required to sign and file company accounts and reports. The nominee (if not also acting as the company’s accountant) will normally require a UK accountant to provide these documents and any relevant advice.
The nominee will be in breach of contract if he or she takes actions in the company’s name except in accordance with the agreement and the owner’s directions. Nevertheless, under UK law a registered director is at risk of personal liability for breach of duties to the company, for any criminal offences, and in limited circumstances for claims of creditors. Since the nominee is not involved in the company’s operations and management, he or she will typically require the owner, who is responsible for those things, to provide a Deed of Indemnity. This will recompense the nominee for any loss resulting from the owner’s actions or omissions, so far as the UK law allows.
On appointment of a nominee director, the appointing owner will normally be provided with a Power of Attorney from the nominee director, giving the owner power to act, including signing financial documents and contracts, in the company’s name. Depending on the company’s chosen bank’s own requirements and protocols (which should be checked), the Power of Attorney may enable the owner to be sole signatory of the company’s account, for example.
In addition, the owner may be provided with a signed (but undated) Letter of Resignation from the nominee, giving the owner effective control of the appointment at will. If the nominee director is the sole director, it should be noted that a replacement must be appointed in case of removal or resignation (or death or operation of law) as if a company is left without a director, ultimately (following notice from Companies House etc.) it could be struck off from the register.
Finally, the company’s Articles (its constitution or rulebook) should be carefully reviewed as these set out the division of power between directors and shareholders and administration of meetings and decisions. If these need to be amended to accommodate the intended arrangements, this is straightforward to achieve provided all owners (or those holding at least 75% of votes) agree.
Nominee directorship can provide many advantages for a business owner. It requires full consideration of the legal requirements, as set out above, if it is to be effective. As an experienced London-based lawyer, Janice Dean will be pleased to advise you. Contact us to find the right solution, including the right legal agreements, for your UK nominee directorship.
The contents of this article do not constitute legal advice and are provided for general information purposes only.
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