Why Your Friend Cannot Be Your Nominee Director: The Legal Risks

By Lucas Seah, Founder of Excellence Singapore Group | Last Updated: July 2026

A nominee director is a director who agrees to act on someone else’s instructions, often to satisfy the rule that a Singapore company needs at least one local director. The catch most people miss is that, in law, a nominee is a full director. They carry the same statutory and fiduciary duties as any other director, including the duty to act honestly and use reasonable diligence under Section 157 of the Companies Act. A private side agreement saying they are “just on paper” does not reduce that liability.

That is why using an unvetted friend or relative as your nominee is risky for both sides. Your friend is exposed to personal liability for the company’s breaches, and you risk losing control and damaging the relationship. A nominee provided by way of business must now be arranged through a registered Corporate Service Provider, so an informal favour from a friend is not the compliant route. This guide explains the real risks, who is personally liable, why a friend is the wrong choice, and what a proper nominee costs.

Key Takeaways

• A nominee director is a full director in law and bears the same statutory and fiduciary duties as any director, including the Section 157 duty to act honestly and with reasonable diligence.
• A nominee can be held personally liable for the company’s regulatory breaches, unpaid taxes, and wrongful acts, no matter what the private nominee agreement says.
• Using an unvetted friend or relative exposes them to that liability and exposes you to lost control and a strained relationship.
• A nominee provided by way of business must now go through a registered Corporate Service Provider, with a fit-and-proper check, a security deposit, and a written agreement.
• Nominee directors are legal in Singapore when the arrangement is compliant; an informal by-business favour outside a registered CSP is not.
• Professional nominee director fees commonly run on the order of S$2,000 to S$3,000 a year plus a refundable security deposit.

What Are the Risks of Being a Nominee Director?

The central risk is simple: a nominee director is not shielded by the fact that they take instructions. Once appointed, they sit on the register at ACRA as a director, and the law treats them exactly like any other director. The ACRA guidance on appointing directors and key officers sets out the duties that attach the moment the appointment takes effect.

The practical exposures a nominee carries include:

• Personal liability if the company breaches the Companies Act or other regulations.
• Responsibility for the company’s filings and statutory obligations, even when day-to-day control sits elsewhere.
• Exposure to claims if the company is used for fraud, money laundering, or other wrongful acts.
• Potential liability for unpaid taxes and certain debts in defined circumstances.
• Disqualification or prosecution where duties are seriously neglected.

None of these can be signed away in a private letter between the nominee and the beneficial owner. A nominee agreement can govern how the parties deal with each other, but it cannot bind ACRA, IRAS, or a court. To understand the wider duty set, see the key responsibilities of a director in a Singapore private limited company.

Is a Nominee Director Personally Liable?

Yes. A nominee director is personally liable in the same way as any other director. The duty under the Companies Act applies to every director on the register without an exception for those who describe themselves as nominees. Section 157 requires a director to act honestly and use reasonable diligence in discharging the duties of the office, and a director who fails is liable to the company for any resulting loss and can also face a penalty.

This is the point that trips up well-meaning friends. They assume that because they are not running the business, signing nothing, and receiving no profit, they have nothing to lose. In reality, if the company files false information, fails to keep proper records, or is used for something unlawful, the nominee’s name is on the document trail. The beneficial owner’s verbal assurance that “I will handle everything” offers no legal protection.

Why Should I Not Use a Friend or Relative as a Nominee Director?

Using a friend or family member can feel cheap and convenient, but it is one of the riskier choices you can make, for both of you.

• You expose your friend to real liability. They take on full director duties for a company they do not control, and they cannot escape that by pointing to your private deal.
• You give away control. A nominee is a real director with real powers. A friend who falls out with you, or who simply gets cold feet, can refuse to sign, resign at an awkward moment, or in a dispute act against your interests.
• You risk the relationship. If a regulatory letter, tax query, or creditor claim lands on your friend, the strain on a personal relationship can be severe and lasting.
• A friend is usually not vetted or insured. A professional nominee is fit-and-proper assessed and works within a compliance framework; a friend brings none of that protection.
• It may not be compliant. If the arrangement is provided by way of business, it must run through a registered Corporate Service Provider, which an informal favour does not.

If your reason for needing a local director is that you are a foreign owner, the cleaner path is a professional service. See what foreign entrepreneurs must know about nominee director services, the wider picture of opening a business in Singapore as a foreigner, and the steps to register a company in Singapore with the local director slot handled properly from day one.

The contrast between an informal friend or relative arrangement and a compliant nominee through a registered CSP is shown below.

The two-panel comparison makes the trade-off clear: a friend gives you a familiar face but no vetting, no compliance framework, and a relationship at risk, while a registered CSP gives you a fit-and-proper assessed director, a written agreement, and a deposit that protects both sides.

Is a Nominee Director Legal in Singapore?

Yes, nominee directors are legal in Singapore when the arrangement is compliant. The law does not ban nominees. What it does is regulate how they are provided so that they cannot be used to hide who really controls a company. A professional nominee provided by way of business must now be arranged through a registered Corporate Service Provider under the CSP Act 2024, which came into force on 9 June 2025.

A compliant arrangement involves a fit-and-proper assessment of the nominee, a security deposit, and a written nominee agreement. The CSP also has to keep proper records and report the nominee relationship to the central registers. An informal “by way of business” nominee outside a registered CSP is not compliant. For the regulatory detail and what changed, read the companion guide on the 2025 nominee director crackdown, new rules, and how to stay safe, and on what to check before engaging a CSP.

Can a Nominee Director Be Removed by the Company?

Yes. A company can remove a director, including a nominee, by an ordinary resolution of the members under the Companies Act, subject to the notice procedure and anything set out in the constitution. So the beneficial owner who holds the shares generally retains the power to vote a nominee out.

That said, removal is not always quick or clean. The notice and meeting procedure must be followed correctly, and the company still needs at least one director who is ordinarily resident in Singapore at all times. You cannot simply remove your only local director and leave the slot empty. A well-drafted nominee agreement deals with resignation, removal, and a smooth handover in advance, which is one more reason to use a professional arrangement rather than a handshake with a friend. A good corporate secretarial service manages the resolutions and filings so the change is done properly, and if you are weighing how lean to keep your board, see whether a sole director can also be the company secretary under the ACRA rules.

What Does a Nominee Director Cost?

A professional nominee director is a paid service, not a favour. Fees in Singapore commonly run on the order of S$2,000 to S$3,000 per year, plus a refundable security deposit that the provider holds to protect itself against the risk it takes on. Treat any figure as a general market range rather than a fixed price, because the cost depends on the provider, the risk profile of the business, and what is bundled in. Excellence Singapore’s own nominee director service starts from S$2,000 per annum.

What that fee buys, and what a friend cannot offer, is a fit-and-proper assessed director, a written nominee agreement, and a compliance framework that keeps the arrangement on the right side of the rules. The deposit and the structure also exist to protect the nominee, which is exactly the protection an unvetted friend would be giving up. Companies should also note the related obligation to maintain registers; see the new ACRA central registers for nominee directors and shareholders and keep nominee filings inside your monthly compliance checklist.

Frequently Asked Questions

What are the risks of being a nominee director in Singapore?

A nominee director carries the full risks of any director. That includes personal liability for the company’s regulatory breaches, responsibility for statutory filings, exposure to claims if the company is used for fraud or money laundering, potential liability for unpaid taxes in defined circumstances, and the risk of disqualification or prosecution where duties are neglected. A private nominee agreement does not remove any of these because it cannot bind ACRA, IRAS, or a court.

Is a nominee director personally liable for the company?

Yes. A nominee director is personally liable in the same way as any other director. Section 157 of the Companies Act requires every director to act honestly and use reasonable diligence, with no exception for nominees. If the company files false information, fails to keep proper records, or is used unlawfully, the nominee’s name is on the documents and the duty falls on them, regardless of any side arrangement with the beneficial owner.

Why should I not use a friend or family member as my nominee director?

Because it exposes your friend to full director liability for a company they do not control, and it exposes you to losing control if they resign, refuse to sign, or act against you in a dispute. A friend is usually not vetted, not insured, and not working within a compliance framework, and a regulatory or tax problem can permanently damage the relationship. If the arrangement is provided by way of business, an informal favour is also not compliant.

Can a nominee director be removed by the company?

Yes. The members can remove a director, including a nominee, by an ordinary resolution under the Companies Act, subject to the correct notice procedure and the constitution. The catch is that the company must always keep at least one director who is ordinarily resident in Singapore, so you cannot leave the role empty. A proper nominee agreement sets out resignation, removal, and handover in advance to avoid a messy transition.

Is it legal to use a nominee director in Singapore?

Yes, when the arrangement is compliant. The law does not ban nominees, but a nominee provided by way of business must now be arranged through a registered Corporate Service Provider under the CSP Act 2024, in force since 9 June 2025. That means a fit-and-proper assessment, a security deposit, a written nominee agreement, and reporting to the central registers. An informal by-business nominee outside a registered CSP is not compliant.

How much does a professional nominee director cost?

Professional nominee director fees in Singapore commonly run on the order of S$2,000 to S$3,000 per year, plus a refundable security deposit held by the provider. Treat this as a general market range rather than a fixed price, since the cost depends on the provider, the risk profile of the business, and what services are bundled in. The fee pays for a fit-and-proper assessed director and a compliant framework that protects both sides.

Talk to Us About a Compliant Nominee Director

A friend on your company register feels like a saving, but it puts your friend on the hook for liabilities they cannot control and leaves your own business exposed if the relationship sours. The compliant route, a fit-and-proper nominee provided through a registered Corporate Service Provider with a written agreement and a deposit, protects both sides and keeps you on the right side of the rules. If you need a local director done properly, talk to us and we will set up a compliant nominee arrangement alongside your incorporation and ongoing compliance.