WHY NOMINEE DIRECTOR SERVICE

According to Section 196(1)(2) of the Company Act 2016, a Private limited company (SDN BHD) shall have a minimum of 1 director. The Director must be at least 18 years old and be a natural person.

Furthermore, according to section 196(4), The director must ordinarily reside in Malaysia by maintaining a primary residence there.

In Malaysia, it is common for foreigners to establish a company with nominee directors serving as their local directors. In addition to the local nominee director, an executive director (who may be a foreigner) should be appointed.

KGM Advisory provides the foreign-owned company with a local nominee director to facilitate their business operations. To take the nominee director service from us, the company needs to fulfill the following requirements due to the independent and responsible nature of our nominee director service:

1. The company needs to be incorporated by KGM Advisory or needs to take the Corporate Secretary service from us.
2. The company should have at least 1 executive director. A foreigner can be an executive director. 
3. The company must provide all the documents required by our legal compliance team to satisfy the KYC requirements.
4. A refundable security deposit is required to safeguard our nominee director and to proceed with the company’s dissolution/liquidation if the executive director and shareholders cannot be reached. The security deposit is refundable upon the termination of our designated director.
5. The director(s) and shareholder(s) should not be from a sanctioned country or conducting business with a sanctioned country’s company.

Conditions for serving as a nominee director for your company:

1. The nominee shall never interfere with the business of the company and shall neither be a bank signatory nor act as a bank account signatory;
2. If any wrongdoing is committed by the directors or shareholders of the company without the nominee’s knowledge, the nominee will bear no responsibility;
3. The nominee will not take a seat or attend a meeting unless specifically requested by the directors /shareholders;
4. In the event that the company incurs debt, the nominee will not be responsible;
5. The nominee must not be a regular employee of your office;
6. The nominee cannot serve as a shareholder or an active director of the company;
7. Directors/shareholders will notify the Nominee one month prior to the end of his or her service;
8. If a Nominee Director engages in activities without the shareholders’ / directors’ knowledge, the nomination will be terminated immediately.
9. The Nominee Director service is temporary, and the company is responsible for finding a local director to replace the nominee.

FAQs – Frequently Asked Questions

Can a nominee director be a signatory for my company bank account?

No, the nominee director cannot manage or participate in the company’s operations. The Nominee director will neither be a signatory on your bank account nor physically involved in your business operations. Therefore, the nominee director will not be liable for any company profits or losses.

Can I use the nominee director’s NRIC copy to apply for a business license?

No. In accordance with our company policy and the nominee director agreement, our clients cannot use the nominee director’s copy of their identification card to apply for a local business license. Note that, with the exception of Tourism licenses, kindergarten licenses, liquor licenses, and child care licenses, all other business licenses do not require an IC copy to apply as long as the business meets all other major requirements.

Am I allowed to terminate the nominee director anytime?

Yes, a company may terminate a nominee director with short notice; however, the annual fee will not be refunded. The security deposit will be refunded upon proper termination.

Who will be liable for statutory compliance if the company never follows?

The appointed Director(s) and Shareholder(s) of the company are responsible for adhering to the company act Malaysia’s requirements. Statutory compliance violations can result in SSM Legal Compound for the company. Nominee Director service will be terminated immediately if the directors and shareholders are not responsive.

Do I need any security deposit to appoint a nominee director?

Yes. A security deposit is required and is refundable upon proper termination of the nominee. The Security Deposit may be increased if the company has a high paid-up capital or employs a large number of local and/or foreign workers.

Why do I need to keep a security deposit?

All directors, including the nominee director, are legally responsible and accountable for legal compliance. If the foreign director cannot be reached, the nominee director will be held accountable. Therefore, our nominee director assumes significant potential risks, and he/she will be required to post a deposit to protect his/her preferences and obligations.

What is the job scope for the local nominee director?

To register a foreign shareholding company in Malaysia, a local director is required, or the foreign director(s) must have a valid long-term pass and a residential address. The company will register using the details (especially residential address) of the Nominee director.

Do I need a nominee director to open a corporate bank account if I’m holding a tourist/short-term visa?

No, a local signatory is not required to open a corporate bank account. We have extensive partnerships with a few foreign banks (HSBC, OCBC, UOB), so as long as you are not bankrupt or blacklisted in your home country, you are eligible to open a corporate bank account with a short-term visa and a valid passport. Even though you are eligible, opening a corporate bank account is subject to approval by the bank compliance authority.

Can a nominee director remove an executive director?

No. A nominee director is typically appointed solely to meet statutory compliance requirements only, such as a local residential address. His/her authority is limited in that he/she is not permitted to manage your company’s day-to-day financial or operational affairs, act as a bank signatory, or sign any invoice, contract, or legal documents on your behalf.