Nominee director protection

[offffffffffshorty]

Hi everyone,

My question is simple, what are the benefits to hiring a nominee director in Cyprus?

More importantly, I would like to know how do you protect yourself and your interests?
As far as I know (and have asked & received answers), this person can cause serious damage (for example, sell everything) and your only hope is that he "fears for his reputation" or "that would be illegal to do so he shouldn't/wouldn't do it".
What are the ways usually practiced which can guarantee (or at least limit) any problems that a nominee director can do?

Thanks

 

[JohnLocke]

You contact a local lawyer who may have a international network i.e. Cyprus who arrange‌ everything for you with a trusted lawyer / firm in Cyprus. Or you visit the‍ Cyprus firm to see with your own eyes what they are.

Actually the most reputable⁠ firms around the globe are not running with anyone's assets, company etc. they make big⁤ business from providing a trusted service.

I know very well that we have members around⁣ here looking for a cheap but good solution, to select a cheap nominee with a⁢ random firm in Cyprus will only give you cheap results.

 

[offffffffffshorty]

Thanks but if you read my question I requested steps other than "trust me", sorry‌ but I am sure there are better more reliable ways people use.

Thanks again for‍ your answer

 

[Sols]

Keep track of all correspondence and contracts so that if something goes wrong, you have‌ ample documentation to use as evidence if you need to bring the nominee before the‍ courts in Cyprus.

Have a lawyer you trust review any agreements that you sign. Insist⁠ on having access to the bank accounts, even if it's read-only.

Prepare agreements and other⁤ necessary paperwork in advance to quickly fire the nominee directors and assume control yourself.

Mitigate you risk further by only having as much assets in the nominee's hands as you⁣ feel comfortable with. If you can withdraw funds from a company controlled by nominee directors⁢ (for example paying yourself dividends), you can do so.

It's ultimately about trust. But you︀ can remove much of the unknown by only work with licensed fiduciaries or lawyers that︁ are members of the local bar association. In Cyprus, that would be:

https://www.cysec.gov.cy/en-GB/entities/asp/list/
https://www.cyprusbarassociation.org/index.php/en/

 

[CyprusLaw]

Hi,

I will agree with what Sols has‍ mentioned above. Just some brief ideas about this:

(a) Use a law firm's nominee services⁠ as it has been suggested above.

(b) Nominee directors are mostly used to show substance⁤ and control in Cyprus - you could also put yourself in the board as well⁣ so that you have decision making powers and more control (majority is better to be⁢ Cyprus directors though).

(c) Structure the company's M&A so as to require shareholder's approval for︀ the important decisions.

(d) You will enter into a service agreement with the nominee.

(e) Nominees are also in a 'risky' position as directors in a company could even be︁ held criminally liable, therefore an indemnity agreement may be requested, this could be made two-sided,︂ protecting you as well.

(f) As shareholder you will have access to the financial statements︃ and accounts.

(g) All of the above are mentioned on the basis that you will︄ be living abroad, in the event that you will be permanently relocating in Cyprus, renting/purchasing︅ property etc the a nominee director may not be necessary at all.

(h) It should︆ be noted that nominees are regulated by the Cyprus Bar and/or CySEC (depending on whether︇ it is a law firm or an ASP).

(i) Finally, directors of a company have︈ liability under Cyprus Companies Law. The Company and/or liquidator can claim against the directors for︉ breach of fiduciary and/or statutory duties. Also, I am giving a UK case law example︊ - If a director in breach of his fiduciary duties made a personal profit out︋ of a business transaction, then he will be liable to pay that profit to the︌ company. As illustrated in Bairstow v Queens Moat Houses plc [2001] 2 BCLC 531, CA︍, directors are obliged when they act in breach of duty to make good any︎ misapplication by them of the company’s assets. In specific, this case considered a team of️ former directors who had declared unlawful dividends. The Court of Appeal held that the former‌ directors were liable to repay the entire amount of unlawful dividends regardless of whether the‍ company might through other mechanisms have lawfully declared such dividends with the result that there⁠ was no loss to the company.

 

[offffffffffshorty]

Thank you for the detailed reply.
I like the part about signing an indemnity paper,‌ I had also heard that you can & should make them do a power of‍ attorney to you.
Do you know any details about that or what else can you⁠ do other than this?

And finally how common are claims against nominee directors in Cyprus?⁤

 

[CyprusLaw]

Yes of course, it is generally common for indemnities to be signed between nominee and‌ shareholder. Generally there are ways that you can be protected. With respect to the POA‍ - you will need to see if this is practicable - as it will depend⁠ on the company's activities and how hands on will your approach be. Reserved matters in⁤ the M&A as I said could also be a solution as you list a number⁣ of important topics that always need shareholder's approval.

In any event when a nominee is⁢ appointed it is important to have an indemnity agreement - this will most probably be︀ requested by the nominee as well, as they have a great risk themselves. Essentially it︁ is a matter of trust and a matter of be contractually protected.

Disputes with nominee︂ directors are not common to be honest due to the fact that most of the︃ times the nominee directors come from law firms/law firm subsidiaries, therefore it is highly unlikely︄ to have any serious issues. The most common issue with nominees is delays in signing︅ and/or filing documents.

 

[troubled soul]

Buy some asset or offshore Gold storage (any kind of asset you like) Which does‌ not do too many Verification . Just use that company name, No Nominee sign any‍ sort of requirement .
Asset which Your nominee Director does not know about . If⁠ he betray you , You can easily liquidate that Asset .

Sorry for My bad⁤ English. Hope I convey the Message in the right manner .