Do Nominee Directors still exist in the UK?

We often get requests from clients for nominee services in the hope that such services will provide better level of confidentiality. Unfortunately, transparence is now the buzzword that has replaced confidentiality and such services are more and more difficult to find. While it's relatively easy to provide nominee shareholder services through a bare trust, you won't find a reputable firm offering nominee director services at a reasonable price.

Definition of a Nominee Director

A nominee director is an individual appointed to the board of a company to act on behalf of another person, typically to maintain anonymity. This person is listed as the company director in official records but does not actively manage the company. Their role has been historically to fulfill legal obligations while shielding the identity of the beneficial owner.

Regulatory Changes at Companies House

The regulatory landscape for nominee directors in the UK has undergone significant changes in the last 20 years, particularly with the introduction of stricter transparency requirements:

1. 2006 Companies Act: This act mandated that every UK company must have at least one natural person (not a company) as a director. The director's name, date of birth, and personal address must be disclosed to the government, although only the name is publicly available.
2. People with Significant Control (PSC) Register: Introduced in 2016, this register requires companies to disclose individuals who have significant control over the company. This move aimed to increase transparency and combat money laundering and other illicit activities.

Impact on Accountants and the Market

These regulatory changes have made the use of nominee directors in the UK much less attractive and therefore less common. The increased transparency and accountability mean that reputable firms are less likely to offer nominee director services due to the potential legal liabilities involved. As nominee directors can be held responsible for the actions of the company, they face significant risks, including prosecution in case of wrongdoing by the company.

Offshore Offerings

Firms that still offer these services often operate from jurisdictions with lax regulations and no extradition treaties with the UK. However, such arrangements are fraught with risk, and reputable banks and financial institutions are likely to refuse to deal with companies that use such nominee directors. Even if a nominee director resides in the UK, their association with multiple companies can be easily verified through Companies House. This transparency allows financial institutions to identify and potentially deny services to businesses that utilize such directors.

Alternatives for Maintaining Privacy

For those seeking to maintain privacy without the risks associated with nominee directors, some alternatives exist:

1. Using Trusts: A common alternative is to use a trust arrangement, where a trustee holds shares on behalf of the beneficiary. This can provide a layer of confidentiality while complying with legal requirements. While it does not provides confidentiality for directors, it provides better confidentiality for shareholders.
2. Family Members as Directors: Some individuals appoint family members they trust as directors, which can offer a degree of separation while ensuring compliance.
3. Professional Advisors: Engaging professional advisors to provide management and administrative services can also help maintain a level of privacy by ensuring that private information that is not required to be published is not publised inadvertantly (eg. personal address of directors or detailed profit for the business).
4. Virtual Offices: Virtual office services offer a registered address and mail handling services. This can help in separating the business address from the personal address of the directors, adding a layer of privacy.

In summary, while the concept of nominee directors is largely obsolete in the UK due to regulatory changes, there are still legitimate ways to maintain privacy and control within the framework of the law. Indeed while transparency has become the new norm, there are still ways to protect your privacy, albeit not to the extent you could in the past.