What are you actually paying for when you buy a nominal service?

Nominal service is a complex of services for selecting candidates for managerial positions when opening a business in a foreign jurisdiction, properly formalizing the powers of such employees, and resolving related issues.

Let's say you've decided to launch a new project in a foreign jurisdiction or are looking to enhance your company's reputation with partners and banks. You understand that a nominal service is what you need to address your business tasks.

Most likely, you have already encountered many difficulties in trying to figure out what constitutes a quality nominal service. Perhaps you have even heard cases where owners had to spend time reworking corporate documents when the nominal representative stopped responding. It's reasonable for you to question the safety and appropriateness of using a nominal service.

The specialists at Antwort Law know for sure that a nominal service, when approached correctly, is a reliable way to help your company grow. Over the past 8 years, we have assisted numerous companies in safely entering foreign jurisdictions by providing nominal service.

In our article, we share what to pay attention to when choosing a business provider, how to avoid risks, protect your business, and use the service to maximum advantage.

Do you need a nominal service?

Depending on the business goals and the legislation of the country where the company is being opened, nominal directors, shareholders, beneficiaries, secretaries, and other specialized employees may be required.

There are many tasks that a nominal service solves for businesses. In some jurisdictions, a nominal representative is the only way to open an account and, consequently, register a business. In others, using a nominal service allows a business to reduce tax burdens and increase the level of trust among clients and investors.

What does "nominal service" include?

It is important to understand that a nominal service is not just "a person with documents." Offers for quick and cheap services can be found. It's challenging to consider such a solution a comprehensive service. We do not recommend using services from unverified providers because by opting for "quick and cheap," you risk your business. Anything can happen, from situations where the hired person is unresponsive or does not speak the language and cannot communicate with the bank to open accounts, to cases where control over the business is lost.

We will consider a completely different level of service. When a provider is responsible for the work done, has extensive experience in selecting candidates, supports the client in the process of appointing nominal representatives and registering the company, promptly finds solutions to related tasks even after business registration.

Nominal service includes several mandatory services: employee selection, preparation of their documents, and the establishment of relationships with such employees.

And quality nominal service also includes accompanying interviews in banks and other institutions as needed, the ability to always promptly provide/update employee documents, and the resolution of force majeure situations that may occur with such a person (for example, an accident).

At the core of the service is the selection of a suitable employee. The selection of employees plays a decisive role in the success of the entire enterprise! Choosing candidates with a good reputation minimizes potential risks for the company owner. For example, representatives in China, Hong Kong, and Singapore earn their reputation over the years, responsibly preserving it, and are therefore among the most reliable candidates.

In countries with a developed social rating, such as China, a mistake in choosing a representative will lead to a loss of time and money. A representative with a low social rating is likely to be denied opening an account, and consequently, business registration will be impossible.

Moreover, the selection of nominal representatives must correspond to the activities the company conducts. Often, it is necessary for the representative to have the relevant education and be able to confirm it. The more requirements legislation imposes on a nominal representative, the more challenging it is to find a suitable candidate for this position.

Why can the cost of nominal services differ for different companies?

The correct selection of an employee, taking into account the requirements of the chosen jurisdiction and the nature of the company's activities, is a challenging and often very meticulous task. It requires a lot of resources and time. Therefore, the cost of such a service, if provided in full and conscientiously, cannot be low.

All companies are different, as are the tasks they solve. A good business provider, in each specific case, selects solutions that ensure the most beneficial use of nominal services for the business. This is reflected in the cost of the service. For example, selecting a nominee for a licensed financial company can be quite expensive because it comes with additional complexities. In this case, the candidate must have a corresponding reputation, education, and sometimes provide evidence of their financial status. In other cases, less stringent requirements may apply to the candidate, and accordingly, the service for their selection may cost you less.

Another question worth asking the provider before signing the contract is "What happens if the nominal representative can no longer perform their functions?" Several options are possible. For example, you can negotiate with the provider about increasing the cost of the service and including insurance for such cases or additional expenses if needed. The main thing is to be confident that the provider is willing to handle such situations in principle.

Is using nominal services safe?

A competent provider offers several levels of business protection, from selecting candidates with a good reputation to legal formalities and technical restrictions. From a legal perspective, the powers of the nominal representative are limited by agreement, and they act strictly in the interests of the business owner.

Technical risk minimization can be expressed in restricting access rights to accounts. Alternatively, an excellent solution would be to organize the workflow in such a way that documents have legal force only when signed by two unrelated nominal representatives. Providing legally sound, business-safe solutions and documents is the provider's task.

Registering a company in a foreign jurisdiction is always a comprehensive and highly responsible task. If you are looking for a reliable partner to handle this task, we invite you to collaborate because quality service is what we aim for at Antwort Law.

Vladyslav Makarenko

Managing Partner
Antwort Law