Breaking Down the Role of a Nominee Shareholder

A nominee shareholder is basically an individual who, in the eyes of the law, holds shares for another person—the real or actual owner. They serve as the legal holder of the shares but are essentially holding these as a stand-in for the true shareholder.

In Singapore, having a nominee shareholder isn’t illegal. However, the reasons behind such an approach should be valid and ethical. Such an arrangement should be declared to key authorities like the Inland Revenue Authority of Singapore (IRAS) and the Accounting and Corporate Regulatory Authority (ACRA), along with any other relevant bodies.

 

The Process of Appointing a Nominee Shareholder

When appointing a nominee shareholder, it’s crucial to have a nominee agreement—a ‘declaration of trust’. This document establishes an understanding of the roles and responsibilities of the nominee shareholder.

This declaration clearly states the actual owner of the shares and confirms that the nominee shareholder will always act with the real owner’s best interests in mind. It also states that the nominee shareholder will transfer ownership back to the actual owner whenever requested. Moreover, any necessary information about the shares will be made readily available to the real owner as and when required.

As an extra layer of protection for the shares, the real owner should procure an undated share transfer form.

 

Reasons to Appoint a Nominee Shareholder

While different people may have various personal reasons to appoint a nominee shareholder, the common benefits circle around privacy and secure control over ownership.

Having a nominee shareholder lets the true owner maintain discretion—both online and offline—while still retaining a significant stake in a company. This makes it vital to choose someone you absolutely trust, like a close family member or a trusted lawyer.

But it’s also important not to overlook the potential risks associated with appointing a nominee shareholder, making it necessary for the real owner to maintain secure control over their shares—even when they have a nominee shareholder handling them.