So, I’ve been meaning to talk about this whole “nominee director” thing for a while, especially when it comes to setting up bank accounts for a business. I’ve seen some buddies try to cut corners, and honestly, the headache that followed just wasn’t worth the perceived savings or convenience.
The Initial Temptation and Why It Seems Easy
You know the drill. You start a company, maybe it’s an offshore thing or you just want quick setup, and someone suggests using a nominee director. It’s pitched as a simple fix: someone else puts their name on the official paperwork, usually for a small fee, to satisfy local regulations that require a resident director, or just for privacy. It feels so clean on paper, like just ticking a box.
My own experience with this was years ago when I was helping a small startup in Southeast Asia. The founders were all non-residents, and the local bank insisted on having a local signatory. We went with a corporate services provider who offered a nominee director—a guy whose name was apparently on a dozen other company documents.
We thought we were smart. Pay the fee, get the registration done, open the bank account, and boom—business is running.
The Moment the Wheels Started Falling Off
The bank account opening process itself was the first sign of trouble. The bank’s compliance team immediately started asking deep, probing questions about this “director.” They wanted to know his source of funds, his involvement in the business operations, and why he had zero emails or direct communication with the actual founders.
We had to scramble. We prepared fake board minutes showing his “involvement,” which felt dirty. The nominee director guy was useless. He just signed whatever the corporate provider told him to, but he knew nothing about our product or our plans.
Then came the real crunch: bank verification and ongoing compliance.
- Every major transaction the bank flagged required his direct sign-off or confirmation.
- He was rarely available. He had other clients, a day job, and clearly viewed us as a minor annoyance.
- If the bank required an in-person visit for KYC updates (which they frequently do, especially overseas), scheduling became a nightmare. We had to pay extra fees just to get him into the bank branch for thirty minutes.
I remember one instance where we needed to wire a large amount of capital for equipment purchase, and the bank froze the transfer because they needed confirmation from the director, not the authorized signatory (who was one of the actual founders). It took three days and three separate documented explanations, all filtering through this disinterested nominee, before the transfer went through. We nearly missed the deadline for the purchase.
The Trust and Legal Disaster
It gets worse than just inconvenience. The core risk is control and liability. Even if you have a “Declaration of Trust” stating the nominee holds the position only for you, legally, to the outside world—and critically, to the bank—that person is the director.
We saw this blow up for another business partner of mine. The nominee director they used got into some personal financial trouble, unrelated to their company. Suddenly, his name being attached to the company flagged the bank’s internal monitoring system because of his association with other high-risk individuals or potentially dubious activities (which he swore were irrelevant, but the bank didn’t care).
The bank immediately issued a notice of account closure, giving them 60 days to move their funds and find a new banking relationship. It was a crisis. Trying to explain the situation to a new bank while trying to dump the current nominee director was a bureaucratic and legal hellscape.
Changing directors, especially when the bank is already suspicious, is a grueling process. They treated the entire affair like a major change in beneficial ownership, requiring full re-verification of every founder and the new director, delaying things for months.
My Final Takeaway: Just Don’t Do It
After wrestling with these issues, I made a strict rule: only use real, active, fully vetted individuals as directors, even if it means restructuring the whole setup. Having an individual on the bank documents who has no real stake, who is slow to respond, and who could potentially expose your company to their own legal troubles is just not sensible business practice.
If you need a local director for compliance, find someone you truly trust, perhaps a trusted lawyer or a genuine partner, not a paid third-party name on a list. For bank accounts today, transparency is everything. Banks are under massive pressure regarding KYC and AML. They see a nominee arrangement, and they immediately smell risk. Why willingly introduce that kind of friction?
It’s better to spend the extra time and money getting compliant with actual, accountable directors than to constantly battle the bank’s skepticism and the nominee’s indifference.