Q: A trusted friend has asked me to become a nominee director of his company. The business seems to be thriving – is there any reason not to take him up on his offer?
A: Company Nominee directorships is an often misunderstood area in UK business, and any expert in commercial law will advise you to proceed with extreme caution before agreeing to become a nominee director. Here’s why:
The term “nominee” refers to a person or company who is not the owner, but in whose name a stock, bonds, or company is registered. As appears to be the situation with your friend, it is generally understood that although the company register lists the nominee as a director, the individual will not actually have a real position within the company, and merely acts as he is instructed. His duties will usually involve signing a few documents occasionally. The problem is, under UK law this is not a recognised concept, and if registered as a director an individual must be involved with the running of the company. As a legal registered director, he must share duties and take responsibility for the company.
Additionally, to comply with business law, a director must operate in a way he considers his actions will enhance the success of a company, and only act in ways he believes will benefit the firm and all involved parties. Furthermore, the law states directors have an obligation not to accept payment or other benefits from a third party as a result of being a company director. Therefore, to receive a fee or favours from your friend to act as a nominee director in name only, with no real say in how the company operates, would be breaking the law.
However, to be clear, offering your services as a nominee director is not illegal. If you are appointed as a nominee director and assume the responsibility of directing the company with its best interests at heart and take your duty seriously, this is perfectly legal.
Before committing to any agreement with your friend, you would be well advised to make sure he agrees that you to have a say in how the company is run and that your judgement and opinions are considered and respected on a par with other directors. If you find your friend expects you to act in a way that only reflects his orders or those of any other directors, it is in your very best interests to decline his offer, as to do otherwise would be illegal in England and Wales as the law stands today.
Disclaimer: This information is provided for informational purposes only, and should not be considered a substitute for professional legal advice.