Nominee service is an intermediary ownership and management tool, meaning the appointment to official positions in the company (director, president, secretary), or as a shareholder, nominee persons, both physical and legal.
Nominee shareholder is the nominee holder of the shares. Nominee shareholder holds shares registered in its/his name in favour of another person, the beneficial owner, under trust-type contractual relationships.
Nominee Director is the nominal executive body of the company acting by written and / or oral instructions of the beneficial owner. Nominee Director signs the document with the beneficial owner (indemnity letter), which indemnifies the nominee director from any kind of claims by the authorities, creditors etc.
The institution of nominee directors and shareholder existed for a long time and has been developed in many countries, including, for example, Great Britain, Ireland, Cyprus. It is not required that a nominee director or a shareholder should be of the same residence: for example, a Panamanian company’s director may be a citizen of the Republic of Cyprus.
Generally the Russian clients ask for the nominee service in order to have their names in no way associated with a foreign company. There are a number of reasons for this:
In some countries (e.g. the UK, Hong Kong), the registers of directors (and often share registers) are open, that is the information can be disclosed to any person who knows whom to inquire. It is not acceptable for many persons if their names, and sometimes the address are available for public review in connection with his/her company.
According to the legislation of some countries (e.g. Ireland and Singapore) the directors of companies registered there must be the residents, while in other countries (e.g. Hong Kong) such company must have a local secretary.
It may be useful to separate a foreign company and its Russian counterpart documentarily, so that to avoid the contracts with offshore companies signed by the same person on both sides.
The relationships between the nominee shareholders and directors are usually executed in the following documents:
Nominee director issues General Power of Attorney in the name of the client. This Power of Attorney (legalized by apostille) contains a provision on expiration of this power of attorney (usually in 1 year), and often the stipulating that the power of attorney can not be withdrawn (i.e., terminated) during this period. Nominee directors may issue the signed revocation letter without a date, and thus the nominee can always be dismissed, even retroactively.
Nominee shareholders of the company produce the Declaration of Trust, which confirms that the nominee shareholder is only a trustee holder in favour of the beneficial owner, and is not entitled either to perform any assignment of rights (purchase, sale, pledge etc.) or to participate in the business of the company (voting at the meeting of shareholders) without written instructions of the client.
In most cases, the main property of the company is the bank account. Any bank works (accepts payment orders) with specific individuals only, who signed personally the documents for opening accounts and bank signature cards and verified his/her identity with a valid passport. Consequently, the bank's client, that is a person authorized to manage the account, is the one who opened the account only. In any conflict situation the bank is first to ask the account holder.