Nominee Director and Beneficial Owner: What You Need to Know When Registering a Company Abroad
When registering a foreign company, owners sometimes consider using a nominee director as a way to increase the confidentiality of the structure. However, it is important to distinguish between two things: information available in a public corporate register and information that the company is required to disclose to a bank, registrar, or other authorized entity.
A nominee director may indeed perform certain corporate functions and, where permitted, appear in the register instead of the actual owner. However, this does not mean that the identity of the ultimate beneficial owner remains unknown to the bank or regulator.
For international businesses, this issue is particularly important when opening a corporate bank account and undergoing KYC/AML procedures. A bank analyzes not only formal directors and shareholders but also the ownership structure down to the ultimate individual owner. Therefore, nominee services should be viewed as a corporate structuring tool rather than a way to make the business owner anonymous.
How Does a Nominee Director Differ from a Beneficial Owner
A nominee director and an ultimate beneficial owner perform fundamentally different roles.
A nominee director is a person who formally holds the position of company director and acts within the scope of the authority granted to them. The specific arrangement depends on the laws of the country and the documents executed between the parties: the director may sign certain corporate documents, perform administrative functions, or ensure compliance with local requirements applicable to the company’s structure.
A beneficial owner, or UBO (Ultimate Beneficial Owner), is an individual who ultimately owns or controls the company. Ownership may be direct, where the individual is directly a shareholder or member, or indirect, for example through a chain of other legal entities.
This is why the name of a director in a corporate register does not in itself answer the question of who owns the business. When conducting a compliance review, a bank will identify the ultimate owner regardless of whether nominee services are used in the structure.
Why Might a Company Need a Nominee Director
The use of nominee services does not in itself indicate an attempt to conceal the business owner. Such a structure may have entirely practical reasons.
For example, in certain jurisdictions, legislation or the specifics of a particular corporate structure may require the appointment of a local director. Nominee services may also be used to perform certain administrative functions locally or to limit the amount of information about the owner that is available specifically in the public corporate register.
In practice, the reasons may include:
- meeting local director or corporate presence requirements, where applicable in the chosen jurisdiction
- performing a limited range of administrative and corporate functions
- providing a certain level of confidentiality in public sources, where permitted by the laws of the country
- maintaining the corporate structure where the owner permanently resides in another country
However, in all these cases, the director’s authority should be determined in advance and the relationship between the parties properly documented. A nominee director should not receive uncontrolled authority over the business simply because their name is formally included in the corporate documents.
Why Nominee Services Do Not Conceal the UBO from a Bank
Bank compliance follows a different logic from a public corporate register. For a bank, it is not enough to know who holds the position of director or directly owns shares in the company. It must identify the individuals who ultimately own or control the business.
Therefore, when opening a corporate account, a bank may request documents not only for the company but also for its owners and, in a multi-layered structure, documents covering the entire ownership chain. Depending on the bank, jurisdiction, and business structure, this may include corporate extracts, constitutional documents, information about shareholders and directors, UBO documents, proof of address, information on the source of funds, and evidence of the source of wealth.
The more complex the structure, the more explanation is usually required as to how it is organized and who actually controls the company. The existence of a holding company, several layers of legal entities, or a nominee director is not necessarily a problem in itself. Risks arise when the documents do not allow the structure to be transparently identified or when information provided to different parties involved in the review is inconsistent.
How Is the Ultimate Beneficial Owner Determined
In international practice, an ownership or control threshold of 25% is often used, but it cannot be treated as a universal rule for every country and every situation. The definition of a UBO depends on the applicable legislation, and control may be established through means other than direct ownership of shares.
For example, indirect ownership through other companies, voting rights, shareholder agreements, or other mechanisms that allow an individual to exercise effective control over a legal entity may be relevant.
Therefore, in a complex corporate structure, it is not sufficient to examine only the first level of shareholders. The ownership chain must be traced down to the individual owners to determine who meets the criteria for an ultimate beneficial owner in the relevant jurisdiction.
Disclosure of Beneficial Owners in Serbia
UBO disclosure requirements vary depending on the country in which the company is registered. Serbia has a Central Register of Beneficial Owners, so a company must take into account not only banking requirements but also separate obligations to register and keep UBO information up to date.
It is particularly important to monitor legislative changes. Requirements for verifying information about ultimate owners are becoming more detailed, so for a foreign owner it is not enough simply to determine the ownership structure correctly when registering a business. The information must also be kept up to date after the company has been established.
If the owner, ownership structure, or another material element of the corporate structure changes, it is necessary to separately determine whether the information in the register must be updated and within what timeframe.
How Does UBO Disclosure Work in Georgia
Georgia’s approach to beneficial ownership disclosure differs from the Serbian model. However, this does not mean that the company’s owner remains unknown to financial institutions.
Banks and other obliged entities identify customers as part of their AML/KYC requirements. Therefore, when opening a corporate account, a bank will analyze the ownership structure and identify the ultimate owner regardless of who performs the functions of director.
For the business owner, the practical conclusion remains the same: public availability of corporate information and UBO disclosure for compliance purposes are separate issues. A structure may provide a certain level of confidentiality from third parties, but when dealing with a bank, the owner must be prepared to disclose the actual ownership chain and support it with documents.
What Risks Arise When Using a Nominee Director
The main risk associated with nominee services lies not in their use itself, but in improperly structured authority and a corporate arrangement that does not comply with the requirements of the relevant jurisdiction.
Before appointing a nominee director, it is advisable to review:
- Director’s authority. Which documents the director is authorized to sign, whether they can manage the bank account, and which decisions require separate approval from the owner.
- Documentation. The rights and obligations of the parties should be documented so that the actual management model corresponds to the corporate documents and applicable law.
- UBO disclosure. It should be determined in advance to whom and to what extent information about the ultimate owner must be disclosed.
- Bank compliance. The structure should be clear to the bank and supported by a consistent set of documents.
- Changes in circumstances. The procedure for replacing the director, terminating their authority, and taking action when nominee services are no longer required should be established in advance.
A particularly risky situation arises when a nominee director is granted broad powers without sufficient control mechanisms. In this case, a tool intended to solve an administrative issue becomes a source of corporate risk itself.
How to Structure the Company Before Registration
The question of whether to use a nominee director is best addressed at the same time as the choice of jurisdiction, corporate structure, and future bank. If the company is registered first and then adapted to the bank’s requirements or UBO disclosure rules, the structure may require additional changes.
Before registration, it is necessary to identify the ultimate owners, map the ownership chain, review the chosen country’s requirements for directors and beneficial owners, and determine whether nominee services actually solve a practical problem. If their sole purpose is to conceal the owner from bank compliance checks, such a model inherently conflicts with the logic of modern AML/KYC requirements.
For an international business, what matters more than the absence of the owner’s name from certain public sources is the predictability of the entire structure: the registrar receives the required information, the bank understands the origin of the business and capital, and the director’s authority does not create risks for the actual owner.
Wolja Digital provides support with foreign company registration and corporate structuring, taking into account UBO disclosure requirements, bank compliance, and the business’s future operating model. If the use of nominee services is justified by the chosen jurisdiction and the company’s objectives, it should be integrated into the structure in a way that does not create additional risks for the owner.