Nominee Director & Nominee Shareholder UK

Mandatory service/Nominee service/Bare trust is a kind of service where an individual is selected as a shareholder or director who is having no freedom of choice over their actions; the appointed individual can only act in agreement with directives from the beneficial owner. The circumstances in which an individual most regularly come across nominee shareholding is when a stockbroker or a bank holds or purchases shares/stock for a client. In such a scenario, the shares will be by default held in the name of the bank or broker as nominee for their client. Nominee directors are persons who are selected as director in name alone and who either offer full power of attorney to the user to control the company or who embark on the directives of beneficial owners. A nominee service permits an organisation to preserve the identity of a company secretary or share-holder off public record. In the UK, it is a lawful requirement for all companies to make available information about who the company secretary and shareholder of the company is. This information is held on public record and is accessible by anybody who demands to see them at Companies House.

Nominee Director & Nominee Shareholder UK

Nominee Shareholders

The chief aim to use nominees in the United Kingdom is confidentiality. In numerous beneficial owners' cases, a client may not be comfortable to be openly linked with the organisation or company and in such a scenario the practice of nominee shareholders will secrete their association. A different significance of nominee shareholding is that a client’s business is possessed by a licensed nominee, who furthermore owns certain other companies registered at the same address and recurrently having the same directors. In such a scenario, the organisation forms part of a group of companies associated to a facility provider which may possibly classify or single out any one corporation.

Difference between a beneficiary owner and nominee shareholder

A beneficiary owner is the lawful title holder of the stocks he/she has bought from a limited company and owner has the choice to continue to stay unknown, which is where signing up an individual as a nominee shareholder originates. A beneficiary owner obtains the dividends or income from the share rights, however, it is the name of a nominee shareholder that reflects on the share certificate and the corporation's authorised records and public documents. Also, the nominee shareholder does not possess the stocks/shares or advantage from shares in any way. Additionally, a nominee shareholder does not have any entitlement over the shares and he/she is required to sign a statement of trust which conditions that they will not take advantage neither will they have any lawful claim over the shares, therefore guarding the beneficiary owner's assets.

Furthermore, nominee shareholders do not command any official role or post within the private business where the beneficiary owner has stakes in. Nominee shareholders do not have access to any other assets or bank accounts and don’t have the right to make crucial verdicts or sign documents on behalf of the establishment limited by shares. They are fundamentally just a name on a stocks certificate and any authorised documentation relating to the firm's registration. Nominee shareholders can be organisations or persons and can reside anywhere in the world. Such individuals are not required to be based in the similar country as the beneficiary owner or the business they possess shares in. A nominee shareholder is designated to safeguard the characteristics of the beneficiary owner for personal or commercial reasons.

Nominee Directors

Nominee director is an individual who is appointed in name only and is guaranteed to follow the directives of their principal. A nominee director is appointed by the board of an organisation to embody the interests of his/her appointor present on the board. In case a nominee director is used incorrectly there can be substantial risks to both the appointing shareholder and nominee director. Even though, the risks will always be determined by particulars of the organisation, these risks can consist of:

  • Disqualification of the nominee director from forthcoming directorships
  • Illegal obligation of a nominee director for breach of their nominee director responsibilities and/or bankruptcy law
  • Civil and unlawful liability for breaking other controlling requirements (such as financial regulation or anti-bribery)
  • Personal obligation of the nominee director in case of any loss to the establishment flowing from the breach of duties
  • Decisions considered illegal and unproductive
  • Civil and criminal liability for the controlling shareholder, for obtaining the breach of duty
  • Effective management and command control not correctly undertaken in the UK (predominantly pertinent to taxation matters)

Some key points before appointing a Nominee Director encompass:

  • Ensure that the add-on company is a separate legal entity and the director is required to performance in the finest interests of the precise company, and not just the group
  • Strong processes should be in place to handle the conflict of interest, in case there is a conflict of interest of a parent company with that of the subsidiary. This is managed effectively by deploying different directors of each business, who have sufficient experience and are able to exercise self-governing decision
  • Make certain that the nominee director has appropriate information of local law, so that they comprehend their duties as a director
  • Make certain that the nominee director has the essential services and know-how to satisfy their role as a director
  • Evaluate the appointment letter, articles of association, and any other appropriate documents to guarantee that the nominee director is talented and encouraged to perform his/her duties as a director
  • Make certain that the nominee director has adequate information about the financial position and business activities of the company and adequate resources to make a well-versed decision concerning any anticipated resolution
  • Be careful of any transaction that does not add value to the business
  • In case of any doubt, seek out expert guidance
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About the author
Blog Author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.


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