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Hello, I hope you are doing great. This expertly created article will walk you through everything you need to know about using nominee directors and nominee shareholders in your offshore company in the BVI or any other similar jurisdiction. This article guides you in the right direction with a transparent approach, helping you become aware of what it is like to appoint a nominee. This expert blogpost will add a lot of value to your business decisions and help guide you in the right direction, so I recommend you watch till the end.
Let's start this article by understanding who is a nominee director and nominee shareholder, along with their roles and responsibilities. Up next, we will discuss the reasons or benefits that you should consider in order to appoint a nominee director or nominee shareholder for your BVI company. Moving forward, you will be familiarized with the important rules and regulations surrounding appointing a nominee for your BVI company. After this, we can quickly proceed to listing the best practices for appointing and maintaining a nominee for your company. You will also learn about the nominee agreement that protects your mutual interests. You will learn contrary thoughts on using a nominee and in the last, you will dive deep into the steps involved in choosing and appointing a nominee director or shareholder for your BVI company. Remember to watch completely, as we want you to have a full understanding.
Who is a nominee director and nominee shareholder?
A nominee director is a person who is nominated and appointed by the owners or shareholders of a company. The nominee director will act as a representative of the board of directors and will have the same duties and responsibilities as any other director. The nominee director will need to invest, act according to the best interests of the company and avoid any conflicts within the company. However, rest assured that a nominee director will not have any real authority, as the real authority lies with you, the ultimate beneficial owner (UBO) of your BVI company. The nominee director can act only according to the instructions of the beneficial owner, as the UBO is the one who holds full authority by holding a power of attorney that grants 100% control over the company.
Whereas, on the other hand, a nominee shareholder's scope is very similar to just acting as a shareholder who is holding shares of the company on behalf of the beneficial owners of the company. Using a nominee shareholder is perfect for those who are not looking to hold a company's shares directly under their name. Unlike a nominee director, a nominee shareholder will not have a managerial or decision-making role within the company, as their scope is very limited.
Reasons to appoint a nominee:
After understanding the basics about the nominees, let's begin this informative article by understanding the benefits that you can reap if you are looking to use nominee directors or shareholders. Because, without understanding the true advantages that you can enjoy while using nominees, there is no point in using them for your offshore company in the British Virgin Islands (BVI).
1. To maintain your privacy:
Yes, this would mostly be the most important reason for many individuals and businesses who are looking to incorporate their BVI companies to use a nominee service. The nominee director and nominee shareholder will help you cover up your name and identity in your company's incorporation documents while dealing with some third parties to avoid unwanted attention from competitors, creditors, or authorities.
2. Avoid unnecessary interactions:
Since you would be using nominees in your business documentation and business dealings, it helps you avoid unnecessary interactions with any unrelated or less-important other parties, helping you keep your identity safe and focus on growing your business.
3. Use the expertise of nominees:
As you know, compliance in offshore jurisdictions such as the BVI might make you feel overwhelmed at times. The nominee director can take up compliance challenges such as annual filings and renewals on time to help you keep your company in good standing throughout its life. You do not even need to travel to the BVI, as the nominee director will take care of those requirements that require your physical presence in the country.
Rules & regulations governing nominee appointment:
Having understood the benefits of having a nominee director or nominee shareholder in your BVI company, it is very important to understand the relevant rules and regulations laid down by the British Virgin Islands that guide the usage of a nominee for their BVI offshore company. In the BVI, you are free to use a nominee, as the government doesn't really restrict you from using one for your company. There is also no requirement to use a nominee only of a local or particular nationality, as you are free to work with a nominee shareholder or nominee director who is from any part of the world. The nominee doesn't need to be physically present in the BVI to act as a nominee director or shareholder for your company. But these fun parts don't mean you can completely avoid giving out your identity to the BVI registrar, as the government of the BVI strictly requires you to disclose the ultimate beneficial owner, in short, UBO, that's you if you are looking to hire a nominee for your BVI company. The BVI maintains a register of UBOs and you are required to promptly disclose the same. If you are wondering if a nominee director or nominee shareholder can act as your BVI company's ultimate beneficial owner, it's not possible in any case. Nominees cannot act as UBOs, as it is 100% illegal to follow such practices. Nominees will always try to minimize their risks by completing your KYC process, also known as the "know your customer" process, by asking for your government-issued identity and address documents. Nominees might back off from serving your request if they feel you do not fall under their allowed business types. Just like how the registrar mandates you to disclose the UBOs, most of the institutions, such as banks, will ask you to disclose the UBOs while applying for your bank account under your BVI company.
Best practices to follow while appointing a nominee:
1. Have a clear nominee agreement; 2. Notify the registrar when the nominee changes; 3. Ensure to have favourable terms in the agreement; 4. Comply with regulatory changes and requirements on an ongoing basis.
Assuming that you understood the important requirement of disclosing the UBOs even in the case of using a nominee, let's jump to the best practices that you need to follow while choosing and using a nominee for your BVI company. Ensure that you are getting into a nominee agreement between you and the nominee to protect mutual interests and avoid possible legal complications in the future, in the worst-case scenario. Also, please be mindful of the contents and terms mentioned in the nominee agreement to ensure that the agreement does not lean toward one of the parties. Clauses such as regular information or updates sharing with you, retaining full access and control of the company with you, and maintaining confidentiality of your identity and information are recommended to be included in the agreement for most of the use cases. If you are wondering what a nominee agreement is, it is kind of a power of attorney but covers a broader scope wherein it guides a nominee in managing or acting on behalf of the owners in the company according to the laid out terms and clauses in the agreement to avoid mutual confusion or conflicts.
Moving forward with best practices, in any case, if your nominee director or nominee shareholder is going to be changed, it is very important to inform the BVI registrar about such changes within a reasonable timeframe to ensure that the information presented to the registrar is the latest and most up-to-date. If there are any regulatory changes with regard to the rights, duties, or usage of nominees for BVI companies, please be mindful of reviewing such changes without waiting any further to comply with the rules and to avoid possible penalties and fines.
Why not to appoint a nominee director/shareholder:
1. BVI is already great at maintaining privacy; 2. The registrar requires you to disclose the ultimate beneficial owner's (UBO) details; 3. Nominee details may be used only in just the company formation process; 4. Banks and other institutions require you to disclose your (UBO's) details.
Let me take a moment and give out some reasons that should convince you and explain why appointing a nominee director or shareholder may not be ideal or required for you in most cases. Because the British Virgin Islands environment and business laws are themselves doing a great job at protecting your identity from personal identity intruders. The country follows a strict approach when it comes to dealing with someone's identity. There are no public directories in the BVI, which ensures that no one can ever have access to your personal identity details under your BVI company. Another situation where it seems appointing a nominee would have no use is when forming your company, as you are mandatorily required to disclose your details, i.e., the ultimate beneficial owners' details. Without disclosing your details, you will never be able to represent your offshore company in the BVI. Nominees are a costly affair that costs upwards of thousands of dollars a year. In most cases, the nominee that you appoint might only show up in your internal company incorporation documents and will never be exposed to the general public. While there are strict privacy rules without any public directories in the BVI, if you appoint a nominee by disclosing yourself as a beneficial owner, it might not add any kind of value as you yourself can act as the director and still get your identity protected by the BVI laws just like any other director having their companies incorporated in the BVI. It is also worth noting that you will need to disclose your identity not only with the registrar but also with other financial institutions, such as banks, even if you use a nominee director or shareholder. I hope you got to know several expert pointers that would have added value to your decision-making process about whether to use a nominee for your BVI company or not.
Steps to appoint a nominee for your company:
You will not gain a comprehensive understanding of the steps involved in appointing a nominee director or nominee shareholder for your BVI company.
Step 1: Choose your nominee:
The first step starts with your detailed research on those nominee service providers who match your requirements. You can search on the internet to find a good nominee provider. It is worth noting that you can benefit from the nominee services offered by us, Vepapu, where we would be able to cover all the aspects of your BVI company journey.
Step 2: Complete the KYC process:
Once your preferred nominee is chosen and you get a detailed quotation, it's time for you to provide your documents as well as a few business details to the nominee so that the nominee provider can successfully complete the "know your customer" procedure, in short, the KYC process, before working on a nominee agreement.
Step 3: Get on a nominee agreement:
Use all the learning that you had from this article in preparing a favourable agreement between you and the nominee. Keeping your requirement in mind, we have a nominee agreement template that was chosen by most of the founders who used our nominee services.
Step 4: Company formation:
After going through the agreement and having a clear, unambiguous understanding of the agreement terms, it is time to initiate the company incorporation process in the British Virgin Islands by including the details of your nominee director and/or shareholder. It's time for you to kickstart your BVI company journey as usual.
Conclusion:
So, yeah, that brings us to the end. Using a nominee director or shareholder is entirely up to you and the BVI allows the use of a nominee in your BVI offshore company formation and management. We hope this article was able to help you gain a detailed and thorough understanding of the benefits, best practices, disadvantages, steps to appoint a nominee, etc.
If you have any doubts or queries, please feel free to reach out to us in the comments section or email us at hello@vepapu.com so that we can try helping you out if you are stuck anywhere in the process.
If you are looking to incorporate your BVI, then we can handle it for you. We will help you in your BVI company formation in just 2–3 days, 100% online; you don't need to travel anywhere. We will accompany you in every step of your BVI journey, right from name availability checks and incorporation and nominee appointments all the way up to filing the required annual forms to comply with the relevant rules and regulations of the country to keep your company in good standing.
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