A nominee director, also known as a local or resident director in Singapore, is an official who’s appointed by a company’s shareholders to sit on the board on their behalf. This typically occurs when the majority investor is an institution, with the contractual rights to occupy one or more seats at the managerial level. Investors may also wish to appoint resident executives with particular skills or experience to represent them when making decisions for the company.
Roles and Responsibilities
a) Overseeing the Company’s Business and Affairs
The duties of a nominated executive do not diminish simply because they have been appointed by a shareholder. Therefore, they still play a major role in setting strategy and structure for the corporation. The executive is charged with reviewing and assessing present as well as future opportunities, including threats or risks in the business environment that may affect operations.
He/she also determines strategic options, chooses those that are to be pursued due to better future prospects and also determines the best techniques for implementing or supporting them. Furthermore, they ensure that the firm’s management structure and capacity are appropriate for putting into operation the recommended strategies.
b) Providing Relevant Information to the Nominating Shareholder
These directors are typically enlisted to the board so that their appointing investor can have a certain level of control over company affairs. Therefore, it’s common practice for them to forward appropriate internal information to the nominating body for review.
While there’s no single rule on when or how an appointee executive can relay these details to shareholders, unless otherwise allowed, the executive must not reveal information to their appointing authority that directly touches on the firm’s dealings with that particular shareholder.
Therefore, if the investor’s interests differ from company policies then resident directors should always proceed cautiously, and preferably act in the corporation’s sole interest instead of any particular shareholder.
c) Exercising Accountability and Responsibility to Appointing Stakeholders
The executives are required to ensure that communication channels between stakeholders and other players are open. They should also understand as well as take into consideration the interests of their nominating stakeholders, plus other company shareholders in equal measure and with mental clarity to make wise decisions for the firm’s general benefit.
Nominee directors often monitor rapport between different parties in the company, by gathering and assessing information about their daily dealings. Basically, they help promote the goodwill and support of all stakeholders in the business.
d) Developing Company Vision, Mission, and Values
Since resident directors sit on the company board, they often work together with other managers to develop corporate vision and mission for guiding or setting the pace for current operations as well as future investments.
The appointee executives determine or review factors such as corporate goals, policies and general culture to be inculcated throughout the business.
e) Ensuring that Books of Account are Safely Kept
One of the responsibilities of these experts is ensuring that appropriate books of account are safe-kept for transparency purposes. In some cases, the executive may be required to assist in paying off debts for the company, even though it’s legally considered a separate entity.
For instance, if the individual tries to ‘trade out of a certain difficult situation’ by borrowing money from the company, they may be found guilty of ‘wrongful trading’ or acting in a manner that solely benefits them and is required to reimburse the debt.
Therefore, a resident director must always exercise their bestowed responsibilities for a ‘proper/moral course’, which is in furtherance to the basis by which they were provided those powers by the appointing shareholders in the first place.
It’s required of them to act in good faith at all times in the company’s best interests, and not for any other ulterior motives. Moreover, in case there’s a conflict of interest between the firm’s interests and the executive’s, the nominee manager must always act in favor of the company.
In conclusion, while a nominee director is not formally appointed by the company for managerial tasks, they are still considered directors by law so long as they discharge the firm’s executive roles. Nevertheless, the individual still owes certain legal duties to the company that is based upon confidentiality, good faith, openness and always considering the corporation’s best interests first before anything else. A nominee executive should also be diligent in performing his/her duties.