The Myth of “Nominee Directors”: When Commercial Practice Collides with Legal Reality
In the shadowy intersection of corporate law and commercial practice lies a curious phenomenon: the “nominee director”. This widely-marketed concept, promoted by corporate service providers as a convenient solution for international business structures, presents a fascinating paradox – it exists everywhere in practice, yet nowhere in law, at least not in the sense suggested by corporate service providers’ fee schedules and letters of engagement.
Directors in the company
The fundamental tension emerges from a simple truth: while corporate law recognizes only one type of director with uniform duties and obligations, the commercial world has created a parallel universe where directors are supposedly able to serve two masters. As Lord Denning famously noted in Boulting v. Association of Cinematograph Technicians, “There is nothing wrong in having nominee directors. It is done every day.” Yet in the same breath, he added the crucial caveat: “Nothing wrong, that is, so long as the director is left free to exercise his best judgment in the interests of the company.”
This dichotomy creates what Justice Farley colorfully described in Ballard as an impossible situation where “the life of a nominee director who votes against the interests of his appointing shareholder is neither happy nor long.” The commercial reality crashes head-on into the immovable object of fiduciary duty – the legal obligation of all directors to act in the best interests of the corporation as a whole, not any particular stakeholder.
Loyalty to the corporation
Some jurisdictions have attempted to bridge this gap between law and practice. Alberta’s Business Corporations Act notably permits directors to give “special, but not exclusive, consideration” to the interests of those who appointed them. https://www.canlii.org/en/ab/laws/stat/rsa-2000-c-b-9/
Yet this attempt at legislative recognition only serves to highlight the fundamental impossibility of the nominee director’s position – how can one give “special” consideration to an appointer’s interests while maintaining undivided loyalty to the corporation?
The marketing of nominee directorship services often glosses over these profound legal contradictions. Corporate service providers sell the concept as a straightforward solution for international business structures, while carefully avoiding the thorny reality that they’re effectively asking individuals to occupy an inherently conflicted position that courts have repeatedly declared untenable.
The Emperor’s New Director: The Reality Behind “Nominee Directors” in Offshore Jurisdictions
The term “nominee director” serves as a polite fiction masking an uncomfortable truth: the attempted commercialization of corporate law evasion, tax evasion and money laundering. While corporate service providers in offshore jurisdictions market “nominee directors” as a legitimate service, they’re essentially selling a fundamental contradiction – the idea that someone can simultaneously be a director under the law while bearing no real responsibility for their actions.
This fantasy collides violently with legal reality. As the Centerra Gold Inc. v. Bolturuk case starkly demonstrates, courts have no patience for directors who attempt to escape their fiduciary duties by claiming they were “just nominees.” The judge in that case found the breaches of fiduciary duty to be “the most egregious he had ever seen,” showing that the “I was just following orders” defense holds no more water in corporate law than it did at Nuremberg.
Law doesn’t recognize different “classes” of directors
The marketing pitch is seductive in its simplicity: “Be a director in name only! Sign what we tell you to sign! No real responsibility!” Yet this proposition fundamentally misunderstands (or deliberately misrepresents) the nature of directorship. As established in cases like Kuwait Asia Bank v. National Mutual Life, the law doesn’t recognize different “classes” of directors with different levels of responsibility. A director is a director, with all the duties and liabilities that entails.
Responsibility for own actions
The reality of offshore “nominee directorship” often involves individuals signing documents without proper review or understanding, rubber-stamping decisions made by others, and attempting to disclaim responsibility for their actions. This practice isn’t just legally dubious – it’s potentially dangerous for all involved:
for the “nominee” directors themselves, who remain legally liable for their actions regardless of any private arrangements;
- for the companies they supposedly direct, which are left without proper oversight and governance;
- for the stakeholders who rely on directors to fulfill their fiduciary duties;
- for the broader financial system, which depends on corporate governance being more than just a paper exercise.
As Róisín Liddy-Murphy notes in her analysis, these directors are truly “caught between the devil and the deep blue sea.” But unlike her more charitable interpretation, in many cases, they’ve willingly sailed into this storm, lured by the promise of easy money for supposedly risk-free paper-signing.
Judges show little sympathy for those who claim they were “just nominees
The courts have consistently pierced this veil of convenience. When things go wrong – as they often do – judges show little sympathy for those who claim they were “just nominees.” The legal obligations of directorship cannot be contracted away or diminished through clever marketing terms or private arrangements.
Secrecy jurisdictions
This practice particularly flourishes in what you accurately call “secrecy jurisdictions,” where the very purpose is often to obscure real control and responsibility. However, as recent legal cases and increased regulatory scrutiny demonstrate, the walls of these secrecy jurisdictions are not impenetrable, and the shield of “nominee” status offers no real protection when serious issues arise.
Attempt to circumvent
The solution isn’t to legitimize this practice through regulation, but to call it what it is: an attempt to circumvent fundamental principles of corporate governance. Real directors direct; they don’t just sign. They bear responsibility for their decisions, and no amount of marketing spin can change this basic legal reality.
For those considering acting as “nominee directors,” the message from courts worldwide is clear: you can’t have your cake and eat it too. Either you’re a director with all the responsibilities that entails, or you’re not a director at all. There is no legal middle ground, regardless of what offshore service providers might promise.
Perhaps the most honest approach is to acknowledge that “nominee director” is a commercial fiction – a marketing term that describes a common practice but carries no legal weight. In the eyes of the law, there are only directors, each bearing the same duties and obligations regardless of who appointed them. The sooner this reality is acknowledged, the sooner businesses can develop more appropriate structures that don’t require individuals to attempt the impossible task of serving two masters.
Founder and Managing Partner of Skarbiec Law Firm, recognized by Dziennik Gazeta Prawna as one of the best tax advisory firms in Poland (2023, 2024). Legal advisor with 19 years of experience, serving Forbes-listed entrepreneurs and innovative start-ups. One of the most frequently quoted experts on commercial and tax law in the Polish media, regularly publishing in Rzeczpospolita, Gazeta Wyborcza, and Dziennik Gazeta Prawna. Author of the publication “AI Decoding Satoshi Nakamoto. Artificial Intelligence on the Trail of Bitcoin’s Creator” and co-author of the award-winning book “Bezpieczeństwo współczesnej firmy” (Security of a Modern Company). LinkedIn profile: 17,000 followers, 4 million views per year. Awards: 4-time winner of the European Medal, Golden Statuette of the Polish Business Leader, title of “International Tax Planning Law Firm of the Year in Poland.” He specializes in strategic legal consulting, tax planning, and crisis management for business.
