A nominee director is an agent appointed by the beneficial owner of the company with the purpose of increasing confidentiality.
Nominee directors in BVI may be appointed by those who are interested in opening a BVI offshore company but do not wish to be directly associated with the business. The nominee will be able to take on certain duties and responsibilities based on an explicit agreement and a power of attorney. Nominee director services can be popular among offshore investors in the British Virgin Islands and the main advantage is the fact that the beneficial owner or the beneficial director is the one who decides the effective involvement level of the nominee. In practice, the needs of different investors will determine the involvement level and, consequently, the costs for this type of service.
Our BVI company incorporation specialists provide a wide range of services related not only to company formation but also to company management, including nominee director and nominee shareholder services. Below, our specialists highlight the main advantage of having a nominee director but also some issues the company founders need to be aware of.
BVI offshore company nominee director
The nominee director in BVI is used in order to conceal the fact that there is a direct relationship between the offshore company and its beneficial owner. This is done for confidentiality purposes and it can be a preferred method of setting up a company in the British Virgin Islands. Regardless of their reasons, investors can thus offset the implications that would come from their direct involvement in the control of an offshore company. This is not to say that the concept is a fraudulent one, it can simply be used by those investors who do not wish to make all of their investment public.
The BVI nominee director will be granted the power to perform various administrative and managerial functions within the company and he will also be able to represent the corporation. The nominee will act on behalf of the beneficial owner and in his best interests, by observing his indications for managing the company.
The relationship between the beneficial owner and the nominee is reflected in a general power of attorney. For example, this document can empower the nominee to manage any business matter and to perform any needed transactions as well as open bank accounts and operate them. The nominee can also enter into agreements, to collect debts and rents. Apart from this power of attorney, the nominee can also sign a statement that explicitly stipulates that he will only act upon the instruction of the beneficial owner and in his best interests.
Having a nominee director has certain undisputable advantages, such as the fact that the appointed individual can handle all managerial matters without the need for the beneficial owner to travel to the BVI at all times. However, there are a few issues that need to be taken into consideration when requesting this type of service. Below, our BVI offshore company agents highlight two of the most important advantages as well as two issues to thoroughly take into consideration:
confidentiality: by using a nominee director service, the owner remains anonymous but still maintains the real control over the company.
taxation: the beneficial owner can avoid certain tax consequences by using a nominee director services; this is applicable in those cases in which the laws in his country of origin would require him to state the place of management and control of an owned company and be subject to the local taxation laws.
costs: one important issue to take into consideration is that when running a company without a nominee director, the annual management costs will be lower; in general, the more power is assigned to the nominee, the higher the costs will be for this type of service.
management: when the owner of the company remains its director, the company structure remains a simple one.
All of these issues are worth taking into consideration by investors who are willing to take up nominee director services.
Director’s duties in the British Virgin Islands
The duties of a company director in the British Virgin Islands are discussed in the Business Companies Act 2004. According to law, the individual who acts as the company director has duties related to the managing and supervision of the company and its affairs. Also included here are the duty of care and the fiduciary duty.
Those interested in BVI company incorporation should keep in mind that a director exercises his powers in accordance with the BVI legislation at all times. This extends to the duties of the nominee BVI director. The main duties are as follows:
•Duty of care: this means that the individual appointed as a director has a duty of diligence and skill towards the company; he must act in good faith and, when needed, rely on the expert advice provided by other parties.
•Fiduciary duties: acting in the best interest of the company and honestly is one of the foremost duties of a company director; he must also act in a manner that does not contravene the BVI laws.
•Compliance duties: this refers to the director’s duties to maintain the records and the registers as directed by law; failure to comply with this can result in a fine.
•Information disclosure duties: the director is under a requirement to disclose relevant information about transactions to the company shareholders as well as to be aware of the company’s financial status and act in accordance when the company is in a situation of insolvent trading, for example.
Our team of BVI company formation agents can provide more information about the duties mentioned in this list. The nominee director will be subject to the duty of care as well as the other ones, however, it can be said that he will serve double fiduciary duty, both towards the company and towards the beneficial owner with whom he has signed an agreement according to which he will engage in the role of BVI company director. This double role can, at times, raise certain issues or conflicts because, as the nominee is not entitled to not take into consideration the wishes of his appointer, he is also not allowed to not consider the interests of the company. At times, the interests of the beneficial owner may conflict with those of the company, however, the nominee will generally abstain from making decisions. As previously stated, when following the rule of law as a company director, the nominee would indeed favor the best interests of the company, however, the matter does not remain as direct when the involvement and the interests of the beneficial owner are also included, therefore the recommendation for the nominee to abstain from conflicting decisions that would favor the company.
For most offshore purposes in BVI, the chosen form of company will be a simple one that will only include one company director and will not make it mandatory for the legal entity to be managed by a Board. However, in those situations in which the nominee is appointed for a larger corporation that includes a Board, the beneficial owner may choose to disclose the role of the appointed nominee for the board, in written form, thus making it easier for observing the clauses related to observing the best interests of the company.
Another, different issue that can be included in a written instrument as per the duties of the nominee concerns the extent to which he may disclose company information to the beneficial owner, again, when discussing larger companies that have several shareholders and are managed through a Board. This too is performed in order to minimize the chances of having a conflict of interest between the company (through its nominee director) and the beneficial owner. The registered agent will be the one to know the data that has been submitted to the Register, as well as the location of the accounting records and other essential company documents (as well as the location where they are kept).
The aforementioned conflict of interest that can arise between the nominee director and the appointer (the beneficial owner) is more apparent when the appointer is an institutional investor. The practices briefly outlined above, such as disclosing the mandate between the beneficial owner and the nominee in certain cases, are helpful for the general functioning of the business. One of our company formation experts can give you more details on the structuring options and how these can influence the nominee director’s duties.
We invite you to watch a video about the use of nominee directors for offshore purposes:
Director’s liabilities in BVI
A BVI company director is subject to certain liabilities, should he breach his duties. In case of common law breaches, directors can expect to be held liable and compensate for the company losses that are a direct result of their breaches. While the director is not expressly liable for the debts and obligations of the company (as this is a legal entity), he is liable for debts and obligations that may arise from his own negligence or fraud. He can also be liable to third parties when he misinterprets issued on behalf of or in the name of the company.
Liability mitigation is possible through effective compliance as well as insurance cover in some cases. All company directors in BVI are subject to the aforementioned duties and liabilities and there is no distinction between nominees and regular directors. What’s more, a company director remains liable for the decisions, omissions, and actions that have a place while he served as a company director, even when he is removed from his duties or he has resigned. The beneficial owner and the nominee director can sign an undated resignation letter. This can be used in order to make it possible for the nominee to step aside at any given time, according to the contract or as may otherwise be required.
Our team provides complete nominee director and nominee shareholder services in the British Virgin Islands. The appointment and involvement of the nominee will be thoroughly discussed before his appointment so that his duties within the company will reflect the best interests of the beneficial owner.
A third-party director does not need to be actively involved in the management of the company. His main function is to fill in the position and his name to appear on any relevant company documents. The beneficial owner of the company still maintains the highest level of control, either by the aforementioned nominee director statement (in which the nominee clearly stipulates that he will act upon the request of the beneficial owner) or by appointing himself as a company representative. When this is the case, the beneficial owner will be the one who will sign all of the relevant company documents and contracts as if he was the executive officer of the company. This configuration, with the beneficial owner acting as the representative and the nominee occupying the official function, can be the most suitable one in certain cases. However, some investors who are interested in BVI company formation will prefer a more complex involvement from the part of the nominee.
When the involvement of the nominee director is fully requested, he is involved in the company’s daily activities, he signs contracts and business documents, as well as the invoices issued by the legal entity. This is the scenario in which the director only acts as declared in the nominee statement, meaning that he follows the clear instructions of the true beneficial owner.
An investor who is interested in BVI company set up can request any of the two types of nominee director services, either the one with the less involvement or the completely involved nominee. The choice can depend on the particular business goals, however, for a complete company management solution, it is advisable to select the option in which the nominee director is fully involved in the activities of the company. This is the option that allows the beneficial owner to enjoy the highest degree of confidentiality when doing business in the British Virgin Islands.
As part of the chosen management structure for the legal entity, foreign nationals who choose to open a company in BVI can enlist nominee shareholder services together with the nominee director ones. The manner in which this service is offered is the same as for directors, with the actual shareholder choosing to use the services provides for the purpose of shielding his identity as a shareholder in a BVI company. much in the same way, the actual shareholder will not appear in the official documents and a fiduciary agreement will be signed between himself and the appointed nominee. This is not to say that the nominee will act without the true shareholder’s consent.
BVI company formation statistics
The two main economic pillars in the British Virgin Islands are financial services and tourism. Many of the offshore companies that activate in the Islands were incorporated under the original International Business Companies Act, however, they have been consolidated into the updated 2004 Act.a picture of the financial services sector is provided by the data on the existing number of companies, as published by the BVI Financial Services Commission. Below, our team of agents lists some of the most important information:
•there were 417,125 Business Companies (BCs) registered at the end of June 2018.
•Companies limited by shares were the most popular business form, in a percentage of 99,86%.
•Other company types, such as the company limited by guarantee or the unlimited company, made up less than 1% of the registered ones.
•In the second quarter of 2018, there were 25,191 registrations of company directors.
The mandatory provision to register directors for BCs after 1 April 2016 increased the number of director registrations in BVI. The main information that is required when registering a company director in BVI includes the following:
for individual directors: name, former name, date of appointment and resignation, if applicable, address, usual residential address, date and place of birth and nationality;
for corporate directors: the corporate name and registration number, date of appointment and resignation (if applicable), the registered office, the address, the date of incorporation and the place of incorporation or registration.
Any changes brought to the company directors (for example, if the nominee is changed or the service is no longer needed), are to be highlighted in the Register.
Investors in BVI should be aware of the fact that failure to comply with the requirements to file with the Registrar the appointment of the first directors or any changes thereof is subject to penalties (it is considered an offence to fail to file the appointment of the first directors within 21 days of their appointment).
It should also be noted that the fact that information about the directors is being disclosed does not mean that the data is publicly available, as in many other jurisdictions. The nominee director (or the director in fact, should he choose to act in this capacity) will disclose the aforementioned data, however, the information can be accessed by court order or when the Register receives a formal request from regulatory authorities.
Foreign investors who are interested in company formation in BVI, with or without nominee directors, can request our company formation services. We offer complete incorporation packages that can also include accredited nominee director services. We know the importance of having a legitimate, experienced nominee who understands his roles, duties and liabilities. Working with a team of experts, such as our own, not only does it make it easier to form the company, it also allows investors to rest assured that the management of their company, through the appointed individual, is a proper one that observes the rules in force in the British Virgin Islands at the moment.
For more information about the requirements for managing a company and the BVI company formation process, please do not hesitate to contact us. Our team of experts will be able to answer your questions and assist you in all matters related to company incorporation.
Call us now at +230 5252 6703 to set up an appointment with our business consultants in the British Virgin Islands. Alternatively you can incorporate your company without traveling to the British Virgin Islands.
As a BridgeWest client, you will beneficiate from the joint expertize of local lawyers and international consultants. Together we will be able to offer you the specialized help you require for your business start-up in the British Virgin Islands.