Director not producing dividend statements

[kkein]

What options does a UBO or even a shareholder have if the (nominee) director is not producing or witholding dividend statements?
How to get the money out of the company?
Is the provider/director liable or something, solely based on a signed declaration of trust ?

 

[JustAnotherNomad]

From what I've heard, at the start of the engagement, a nominee director would typically provide a signed resignation letter with the date left blank.
So you can always set in a date of your choosing and thus prove that he's no longer director of the company in case of any foul play.

But you should also know that this doesn't offer true protection in case of an investigation. If the tax authorities investigate such a setup, they will look at the salary the director received.
And if the director wasn't paid a realistic salary, if there wasn't a realistic rent for the office, non-tax reasons for having a company in that country and so on (economic substance), then they will deem your whole setup void and say you were actually the one managing the company.

 

[JohnnyDoe]

JustAnotherNomad said:
From what I've heard, at the start of the engagement, a nominee director would typically provide a signed resignation letter with the date left blank.
So you can always set in a date of your choosing and thus prove that he's no longer director of the company in case of any foul play.
Click to expand...

This, or you are essentially f”¦.d, as a “declaration of trust” is toilet paper.

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[JackAlabama]

Cant you just fire the director on the spot by shareholder resolution? After all, the director is just an employee.
On the other hand, the director can just resign as well.

Also, sometimes shareholders continue to operate bank accounts without even the director having any interference possible. That wont make the director any more liable.

 

[Don]

kkein said:
What options does a UBO or even a shareholder have if the (nominee) director is not producing or witholding dividend statements?
How to get the money out of the company?
Is the provider/director liable or something, solely based on a signed declaration of trust ?
Click to expand...

Care to disclose the jurisdiction?
The dividend distribution is usually the decision of the shareholders.
Depending on the jurisdiction and the specific circumstances, you may be able to take legal action against the director for breach of fiduciary duty or other violations of corporate law.

 

[CyprusLawyer101]

If you maintain control of the shareholding then there are various actions available and you should be ok. However things should happen with surgical precision especially if you are in dispute with this person, as anything that might trigger uncertainty to the bank may make them to withhold funds/ block the account and ask for absurdities like a court order to release the funds ( as JohnnyDoe well knows ).
If you would like me to have a look at your case, you can PM me.

 

[kkein]

CyprusLawyer101 said:
If you maintain control of the shareholding then there are various actions available and you should be ok. However things should happen with surgical precision especially if you are in dispute with this person, as anything that might trigger uncertainty to the bank may make them to withhold funds/ block the account and ask for absurdities like a court order to release the funds ( as JohnnyDoe well knows ).
If you would like me to have a look at your case, you can PM me.
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what if nominee director is also nominee shareholder? Anyway, thanks for your offer. Should - God forbids - things get there, i will probably need a lawyer..

 

[JohnnyDoe]

kkein said:
what if nominee director is also nominee shareholder?
Click to expand...

Not smart. Now you are royally f”¦.d

You should always separate directorship from shareholding, and use a shareholding system that you can ultimately control directly, otherwise you are effectively giving away your company.

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[kkein]

Shouldn't this forum have a "scamboard" btw, where people can report their experiences with the various "providers" around?
There is the opposite (recommended ones), but that only in mentor group..
something like romancescam.com for online dating old)(#

 

[JackAlabama]

kkein said:
what if nominee director is also nominee shareholder? Anyway, thanks for your offer. Should - God forbids - things get there, i will probably need a lawyer..
Click to expand...

Yah that is a no bueno zone. People who have to operate that way usually leave only minimal cash in the bank and withdraw $ right after incoming wires. (There are places where such operation is a must).
And if stuff goes wrong, just call it a day.

 

[lacomaco]

Although Johnny Doe considers the declaration of trust as a toilet paper, it probably still gives you the possibility of
- revoking the trust formed
- declare to the director that you are the shareholder and decide to hold an extraordinary meeting of shareholders
- if the director accepts being there then you decide whether to keep him or change the director.

Legally it is not a very complicated procedure. It all depends if the corporate service provider is operating in a country where both the trustee and corporate services are licencable activities, then you could threaten them with reporting their non-cooperation and non-compliance, and probably they will be happy to get rid of you (and vice versa) and not to fight with their home authorities.

If the operate from a non-licence country then yes, you are f...ed - but now nearly everywhere the activities are licenced so you have a recourse. Whether it is worthwile to pursue is up to you.

 

[JohnnyDoe]

lacomaco said:
Although Johnny Doe considers the declaration of trust as a toilet paper,
Click to expand...

Forming a trust requires certain formalities. @CyprusLawyer101 could elaborate further on the requirements for forming a trust in Cyprus.

lacomaco said:
it probably still gives you the possibility of
- revoking the trust formed
Click to expand...

No trust can be formed with a simple declaration (of course it might depend on how it is written and on the jurisdiction).

lacomaco said:
- declare to the director that you are the shareholder and decide to hold an extraordinary meeting of shareholders
Click to expand...

First you need to have the trust recognized, then change the shareholder. Only then you can hold a meeting as a shareholder.

lacomaco said:
if the corporate service provider is operating in a country where both the trustee and corporate services are licencable activities,
Click to expand...

In this case, it is unlikely that the CSP pretended to form a legitimate trust with a simple declaration.

lacomaco said:
then you could threaten them with reporting their non-cooperation and non-compliance, and probably they will be happy to get rid of you (and vice versa) and not to fight with their home authorities.
Click to expand...

If they have not yet ran away with the money

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[CyprusLawyer101]

The instrument of trust used in nominee arrangements has a strong validity, however from a practical point of view it does not give you control over the company . As JohnneDoe mentions you first have to get it recognized and enforced prior to changing the shareholder and thus gain control of the company. Indeed if it is through a CSP you can place pressure in various ways as Iacomaco says, however it needs careful handling not to get caught in any deadlock.

To clarify, the instrument of trust used in nominee arrangement is different that the general concept of the trust. It could fall under the category of a bare trust, but in general has a different and simpler framework.

Last edited: May 9, 2023

 

[lacomaco]

JohnnyDoe said:
Forming a trust requires certain formalities. @CyprusLawyer101 could elaborate further on the requirements for forming a trust in Cyprus.
Click to expand...

It depends on the country where the trust was established

JohnnyDoe said:
No trust can be formed with a simple declaration (of course it might depend on how it is written and on the jurisdiction).

First you need to have the trust recognized, then change the shareholder. Only then you can hold a meeting as a shareholder.
Click to expand...

To be recognized by whom? It just exists. The settlor was the client, the trustee is the trustee and the settlor is the beneficiary.

JohnnyDoe said:
In this case, it is unlikely that the CSP pretended to form a legitimate trust with a simple declaration.
Click to expand...

But they helped to draft the trust document on behalf of the trustees, no? Obtained the signature of trustees on the document... They probably formed thousands of trust during their activities so all are illegitimite

JohnnyDoe said:
If they have not yet ran away with the money
Click to expand...

Possible, so what would be your suggestion? BTW we had a Cyprus case where we transferred hundreds of companies this way. The previous CSP bribed OUR lawyer so we faced some problems but at the end we manged to do it. And now he is on a US sanctions list haha

 

[JohnnyDoe]

CyprusLawyer101 said:
The instrument of trust
Click to expand...

This is not a declaration of trust.

For example, in Cyprus you can't just wake up one day, write a random declaration of trust and pretend to have formed an international trust, which is precisely regulated by the law and requires certain formalities.

lacomaco said:
It depends on the country where the trust was established
Click to expand...

Of course. I don't know the law of every country, but I guess certain formalities and rules must be followed everywhere.

lacomaco said:
To be recognized by whom? It just exists. The settlor was the client, the trustee is the trustee and the settlor is the beneficiary.
Click to expand...

By the court, for example, if you want to regain control of your company and its assets via legal action.

lacomaco said:
But they helped to draft the trust document on behalf of the trustees, no? Obtained the signature of trustees on the document... They probably formed thousands of trust during their activities so all are illegitimite
Click to expand...

I don't know how this declaration is written and signed, so I can't comment. For example, if a declaration is only signed by the trustee and has no specific clauses stating the contrary, then true trust could be legally revoked/modified unilaterally by the trustee.

lacomaco said:
Possible, so what would be your suggestion?
Click to expand...

To hire a good lawyer and have all important documents carefully analyzed before signing.

Last edited: May 9, 2023
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[lacomaco]

I missed a question mark after "so all are illegitimite?"

 

[JohnnyDoe]

lacomaco said:
I missed a question mark after "so all are illegitimite?"
Click to expand...

Nothing is until it is challenged.

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[CyprusLawyer101]

I think this is a declaration of trust for a nominee shareholder arrangement, no?

 

[lacomaco]

CyprusLawyer101 said:
I think this is a declaration of trust for a nominee shareholder arrangement, no?
Click to expand...

Yes

 

[JohnnyDoe]

A “nominee shareholder” is something that goes against the concept of trust and has no legal standing. In some (civil law) jurisdictions it is even a crime to use a nominee shareholder. In other words, the “nominee shareholder” is in all effects the real owner of the company unless he is declared to be a nominee by a court, typically for tax reasons.
It might be easier to prove a nominee to be such than a trust to exist.

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