Nominee Services: Enhancing Privacy In Legal Structures For Expats

Many people value privacy for personal reasons, but it’s also one of the key elements to business success. While other factors like tax efficiency, good organization, and mindful risk management are also crucial, the importance of privacy cannot be overstated.

Many business owners use nominee services to maintain their privacy and secrecy. This enables the owner to concentrate on growing the business while the nominee handles formalities. This can be hugely beneficial for discreetly managing international businesses and investments.

In this article, we will dive into what exactly are nominee services, their benefits and risks, and how you can leverage them effectively to reach your goals. 

WHAT ARE NOMINEE SERVICES?

Nominee services are a legal arrangement in which a legal person (the nominee) represents another person or entity (the beneficial owner) in business dealings. More specifically, while the beneficial owner retains ownership and control over the business, the nominee holds legal title to its assets or positions. Note that the nominee may be a natural person or a corporation, but revising local laws to ensure you stay compliant is important. 

Generally, a nominee could be appointed as a director, shareholder or secretary. Whatever the case, qualified professionals often take over these roles, as they entail a considerable degree of responsibility and accountability. Nominees could be lawyers, attorneys, CPAs, or just people the business owner deems trustworthy.

LEGAL STANDING ACROSS COUNTRIES 

Even though I want my clients to enjoy more freedom, I never suggest doing anything illegal or bending the rules. Every country has a unique standing on nominee services, so you must do your due diligence to fully understand local laws and regulations. What works in one country may not work in another. Always consult with a qualified attorney in case of doubt. 

In some countries, nominee services are fully recognized and regulated under the law; these jurisdictions specify the reporting requirements and nominees' responsibilities. These rules prevent illicit activities such as money laundering, tax evasion, and financing terrorism and force businesses to allocate more resources toward compliance. 

When considering nominee services, please always research and carefully plan every step of the process. International tax regulations are getting stricter by the day, so it is mandatory to understand each jurisdiction's rules and hire reputable nominee service providers. 

Some common jurisdictions offering nominee services are:

• Delaware (United States);

• Nevada (United States);

• Panama;

• British Virgin Islands;

• Hong Kong;

• Liechtenstein.

WHY EXPATS USE NOMINEE SERVICES

Nominee services can be perfectly legal, but you must abide by the rules of the jurisdiction you choose. Below are the main reasons why expats use nominee services: 

PRIVACY AND PROTECTION

We live in a time when privacy is threatened. Your choices are monitored no matter what you do, where you go, or the websites you visit. Therefore, nominee services shield your information and assets, providing an extra layer of protection and anonymity. This benefit is critical for expats who might be more exposed to targeted attacks, identity theft or unwanted scrutiny. 

For example, high-profile individuals or those with controversial political views may use nominee services to keep a low profile. In short, you can reduce the exposure of your financial and business dealings by appointing a nominee with the assets or business titles under their name. 

STRATEGIC BUSINESS MOVEMENTS

Nominee services can be helpful when exploring new markets or business opportunities. Hiring a nominee director or shareholder could help you tap into new jurisdictions more smoothly, ensuring that your business strategies are carried out without competitors knowing about them.

Imagine you need to conduct sensitive negotiations, mergers or acquisitions where disclosing the true backers too early might alter the terms of deals or attract undesirable competition. Moreover, nominee services could help you adapt to a new country’s business culture and legal environment before actively participating.

LOCAL COMPLIANCE AND EASE OF BUSINESS

Staying compliant sometimes means doing things differently than you expected. Many jurisdictions mandate companies to have a certain percentage of local directors or shareholders officially registered. In other words, the nominee must be a resident of the country where you want to expand your business. 

For example, in jurisdictions like Singapore, having a local nominee director is a legal requirement for setting up and running a business. By hiring nominees familiar with the local regulatory framework, your business remains fully compliant with all legal obligations, avoiding potential fines and complications. 

RISKS OF USING NOMINEE SERVICES

The benefits of nominee services are evident, as they provide more privacy and operation in a new jurisdiction. However, it is essential to take their risks into account:

MISUSE AND MISMANAGEMENT

One significant risk is using nominee services for illicit purposes. For example, a criminal may hire a nominee to launder money in a different country. The funds may be illegally earned. This misuse damages the legitimacy of nominee services and also exposes the beneficial owner to legal risks and penalties. 

Before hiring a nominee, ensure they are trustworthy, professional, and have a proven track record. Establish a legally binding agreement clearly outlining the nominee’s roles and limitations, allowing for better control and prevention of mismanagement.

INCAPACITATION OR DEATH

Although not as discussed, one of the major risks of using nominee services is what happens if the nominee becomes incapacitated or even passes away. Of course, you must always make sure you appoint a competent nominee, but unforeseen circumstances can complicate this arrangement. 

When these events occur, the two main results are usually the transfer to the heirs and the abolition of the agreement. In the first scenario, heirs may have different competence, capacity or understanding levels. In contrast, in the second scenario, you may face administrative burdens and complications in operating or managing your assets. 

LEGAL AND FINANCIAL IMPLICATIONS

Reporting requirements are getting more stringent by the day; wherever you want to engage nominee services, you must do your research to abide by the local rules since incorrect use of these services may lead to far-reaching consequences. You could be liable for fines, penalties, and even criminal charges, among other undesirable outcomes. 

Regardless of the jurisdiction you choose, please understand the legal requirements and potential implications of using nominee services. Always consult with legal experts in your chosen country to get the best guidance. Additionally, keep in touch with your designated nominee to ensure they are complying with legal changes and requirements.

SELECTING A GOOD NOMINEE

Despite potential pitfalls, nominee services may be invaluable for expats eager to live and do business abroad. Their utility boasts many applications, from streamlining business operations and delegating to protecting personal privacy. For example, as an expat, your foreign status might give you challenging access to some jurisdictions where you want to conduct business, but hiring a nominee could allow you to tap into this new market. 

Another practical application is the use of nominee services for privacy protection. High-net-worth individuals or those in delicate occupations may prefer to stay anonymous while making new investments. A nominee, therefore, would hold assets in their name, protecting them against threats or unwanted attention. All in all, expats can leverage the versatility of nominee services to address various challenges across jurisdictions. 

Nominee services provide expats with crucial support in overcoming business and privacy obstacles abroad

CONCLUSION

Nominee services might be complex since they require a holistic understanding of each country’s laws, but they can help you conduct business abroad more privately and successfully. Privacy is one of the most important ingredients of success when moving abroad. As long as you stay compliant while engaging nominee services, you can tap into new markets without being physically present. 

As always, please do your due diligence. In the case of nominee services, review the legal agreement regularly to ensure your nominee abides by the terms and conditions. Also, stay informed about legal changes affecting your business operations and address any concerns immediately. If you take the time to hire and use these services, you will be more likely to succeed in your business dealings abroad.