Nominee agreement

In plain words

A nominee agreement is a contract between a nominee director or shareholder and the real owner that records the true nature of their relationship: the nominee holds the position formally and acts on the instructions and in the interests of the real owner. The document is usually accompanied by a waiver of rights, powers of attorney and pre-signed letters of resignation.

It is important to understand what such an agreement does not do. It does not hide the beneficial owner: when an account is opened, the bank establishes who actually controls the company, and registers of beneficial owners exist in a growing number of jurisdictions. The agreement governs the parties’ relationship with each other, not their relationship with the state.

There are lawful reasons to use nominees: some jurisdictions’ requirements for a local director, administrative convenience, everyday privacy. But in the context of compliance and due diligence such structures are treated with caution and require explanation. Where there is no real justification, direct ownership is almost always the calmer option.

Where it is encountered

What the agreement contains

How to approach it

1. 01Establish the real reason
2. 02Assess whether a nominee is needed at all
3. 03Put the agreement in writing
4. 04Disclose the beneficiary to the bank
5. 05Prepare an explanation for checks

What you need to know

• The agreement governs the parties’ relationship, not their relationship with the state
• The beneficial owner is disclosed to the bank and in registers
• Compliance treats nominee structures with caution
• Without a written agreement the real owner is vulnerable
• In due diligence such a structure will have to be explained

Common mistakes

• ✕Using a nominee to conceal ownership
• ✕Operating without a written agreement
• ✕Not disclosing the beneficiary to the bank
• ✕Keeping outdated nominee structures before filing
• ✕Choosing a nominee without checking their reputation

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