Nominee Directors in Malaysia

Nominee Directors in Malaysia | Bestar

Nominee Directors in Malaysian Companies

In Malaysia, nominee directors play a crucial role, particularly for foreign investors, in fulfilling statutory requirements under the Companies Act 2016. Here's a breakdown of key aspects:

1. What is a Nominee Director?

A nominee director is a Malaysian resident appointed to satisfy the legal requirement for companies to have at least one director who ordinarily resides in Malaysia. While they are formally listed as a director in company records, their role is typically non-executive, meaning they generally have no operational involvement or decision-making power in the day-to-day running of the company.

2. Why are Nominee Directors Used?

• Statutory Compliance: The primary reason is to meet the Companies Act 2016 requirement for a resident director. This is particularly relevant for foreign investors who may not have a Malaysian resident to appoint as a director.

• Confidentiality and Privacy: Nominee directorships can help maintain the anonymity of the beneficial owner in public records, although beneficial ownership information must still be disclosed to regulators like the Companies Commission of Malaysia (SSM) for AML/CFT compliance.

• Local Expertise: A nominee director, often provided by professional corporate services firms, can offer insights into local corporate practices and regulatory frameworks.

• Temporary Solution: For foreigners seeking a local partner, a nominee director can serve as a temporary solution until a suitable resident director is found.

3. Duties and Responsibilities of a Nominee Director:

Despite their non-executive role, nominee directors in Malaysia are legally bound by the Companies Act 2016 and owe the same fiduciary duties to the company as any other director. These include:

• Acting in the best interests of the company: This is paramount. Even though they are appointed by a "nominator" (the beneficial owner or appointing party), their primary duty is to the company as a whole, not solely to the interests of their appointer.

• Exercising independent judgment: They must make decisions in good faith and for the benefit of the company, even if it conflicts with the nominator's wishes.

• Exercising due care, skill, and diligence.

• Attending board meetings and contributing to decisions.

• Ensuring regulatory compliance: They are responsible for the company's adherence to Malaysian corporate laws and regulations.

• Declaring conflicts of interest: Any potential conflicts between their interests (or the nominator's interests) and the company's interests must be disclosed.

4. Risks and Liabilities of a Nominee Director:

Being a nominee director carries significant responsibilities and potential liabilities:

• Personal Liability: Nominee directors can be held personally liable for breaches of their fiduciary duties or for any losses suffered by the company due to their negligence or misconduct.

• Criminal Penalties: Failure to fulfill fiduciary duties or contravention of certain sections of the Companies Act 2016 can lead to severe penalties, including imprisonment and substantial fines.

• Reputational Risk: Involvement in legal disputes or corporate governance failures can damage their professional reputation.

• Conflicts of Interest: Navigating the balance between the nominator's interests and the company's best interests can lead to complex ethical dilemmas. In cases of actual conflict, they may need to recuse themselves or even resign.

5. Legal Framework and Agreements:

• Companies Act 2016: This is the main legislation governing companies and directors in Malaysia. Section 217 specifically addresses the responsibility of a nominee director to act in the best interest of the company.

• Nominee Director Agreement: It is crucial to have a comprehensive legal agreement between the nominator and the nominee director. This agreement typically outlines the nominee director's limited powers, responsibilities, reporting requirements, and provisions for resignation and liability protection.

• Power of Attorney and Call Option Agreement: These documents can provide the beneficial owner with more control and mechanisms to compel the nominee director's resignation if needed.

Important Considerations:

• Professional Services: It is highly recommended to engage reputable corporate services providers when appointing a nominee director. These firms typically conduct thorough Know Your Customer (KYC) checks and ensure compliance with all regulatory requirements.

• Transparency: While nominee arrangements offer some privacy, companies must adhere to Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) regulations, which require disclosure of beneficial ownership to regulators.

• No Operational Control: Generally, a nominee director will not be a bank signatory, nor will they be involved in the day-to-day financial or operational management of the company.

In essence, while nominee directors in Malaysia fulfill a vital compliance function, they are not merely rubber stamps. They carry genuine legal responsibilities and must prioritize the company's interests above all else.

Fees

The fees associated with nominee directors and other related company services in Malaysia can vary significantly depending on the scope of services, and the complexity of your company's operations. Here's a general breakdown of fees you might encounter:

Nominee Director Fees:

• Annual Fee: This is the most common charge. You can expect to pay anywhere from RM 3,000 to RM 6,000 per year for a nominee director. Bestar might offer lower rates (RM 3,500 per year). Bestar may charge higher (up to RM 10,000 or more annually, especially for more involved roles or perceived higher risk).

  
  

• Security Deposit: Bestar requires a refundable security deposit for nominee director services, which can range from RM 3,000 to RM 5,000. This is to mitigate the nominee director's personal liability.

  
  

• Ad-hoc Charges: Additional fees may apply for specific tasks a nominee director is asked to perform, such as:

  
  

  • Signing documents (outside of routine compliance).

  • Attending meetings.

  • Assisting with bank account opening (this can be a significant charge, RM 500 - RM 1,000 per bank account).

  • Special resolutions or corporate actions.

How Bestar can Help

Bestar is an invaluable partner for businesses, especially for foreign investors, looking to establish and operate in the country. We offer a wide range of expertise and support that helps companies navigate the complex regulatory landscape, save time, reduce risks, and focus on their core business activities.

Here's how Bestar can help:

1. Company Incorporation and Setup:

• Guidance on Business Structures: We advise on the most suitable legal entity (e.g., Sdn Bhd, branch office, representative office) based on your business objectives, ownership structure, and tax implications.

• Name Search and Reservation: We handle the process of checking name availability with the Companies Commission of Malaysia (SSM) and reserving your desired company name.

• Document Preparation and Filing: We prepare all necessary incorporation documents (e.g., constitution, statutory declarations) and file them with SSM, ensuring accuracy and compliance.

• Registered Office Address: We can provide a statutory registered office address, which is a legal requirement for all companies in Malaysia.

• Bank Account Opening Assistance: Bestar assists in opening corporate bank accounts, which can be a complex process, especially for foreign-owned companies.

2. Company Secretarial Services:

• Statutory Compliance: This is our core function. We ensure your company adheres to all provisions of the Companies Act 2016 and other relevant regulations.

• Appointment of Company Secretary: We provide a qualified and licensed company secretary, a mandatory role for all Malaysian companies.

• Maintaining Statutory Records: We meticulously maintain all statutory registers (e.g., register of members, directors, secretaries) and minute books of meetings.

• Filing of Statutory Documents: We handle the timely preparation and filing of essential documents with SSM, such as Annual Returns, financial statements, and various forms for changes in company particulars.

• Board and Shareholder Meetings: We can assist in preparing agendas, attending meetings, drafting minutes, and ensuring resolutions are properly recorded and implemented.

• Advisory on Corporate Governance: They provide guidance to directors on their fiduciary duties and corporate governance best practices.

• Monitoring Regulatory Changes: They stay updated on changes in laws and regulations and advise your company on necessary adjustments to remain compliant.

3. Accounting and Taxation Services:

• Bookkeeping and Financial Reporting: We manage your company's accounting records, prepare financial statements (profit and loss, balance sheet), and ensure compliance with Malaysian Financial Reporting Standards (MFRS).

• Tax Compliance: We prepare and file corporate income tax returns with the Inland Revenue Board of Malaysia (LHDN), advise on tax planning strategies, and manage other tax-related filings like SST (Sales and Service Tax).

• Audit Coordination: We can liaise with external auditors and provide necessary documentation for annual statutory audits (which are mandatory for most active companies).

4. Nominee Director Services:

• Fulfilling Residency Requirements: As discussed, we provide a resident nominee director to meet the Companies Act 2016 requirement, particularly beneficial for foreign investors.

• Legal Agreements: We ensure proper legal agreements (e.g., Nominee Director Agreement) are in place to protect the interests of both the nominator and the nominee.

5. Other Value-Added Services:

• Payroll Processing: Handling employee salaries, EPF, SOCSO, and EIS contributions, and income tax (PCB) deductions.

• HR Advisory: Guidance on employment laws, drafting employment contracts, and HR best practices.

• Immigration Services: Assisting with visa applications, work permits (Employment Pass), and other immigration matters for expatriate employees.

• Business Advisory: Providing strategic advice on market entry, business expansion, mergers and acquisitions, and risk management.

• Adherence to Industry-Specific Regulations: Ensuring compliance with specialized regulations relevant to your industry.

Benefits of Engaging Bestar:

• Expertise and Professional Guidance: Access to professionals with in-depth knowledge of Malaysian legal, financial, and administrative processes.

• Time-Saving: Outsourcing administrative and compliance tasks frees up your valuable time to focus on core business activities, growth, and strategy.

• Cost Efficiency: Often more cost-effective than hiring and maintaining a full in-house team for secretarial, accounting, and compliance functions, especially for startups and SMEs.

• Ensured Compliance and Reduced Risk: Minimizes the risk of penalties, fines, and legal issues due to non-compliance, as they stay updated with the latest regulations.

• Improved Operational Efficiency: Streamlines processes and ensures tasks are completed accurately and on time.

• Scalability: Services can be scaled up or down as your business grows and its needs evolve.

• Peace of Mind: You can be confident that your company is adhering to all legal requirements, allowing you to concentrate on your business's success.

In summary, Bestar acts as a crucial backbone for businesses in Malaysia, offering specialized knowledge and administrative support that is essential for smooth operation, regulatory compliance, and sustainable growth.

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