The Nominee Director Fiction: How Offshore Providers Corrupted Corporate Governance

Introduction: A Commercial Fiction Masquerading as Legal Reality

At the murky boundary between corporate law and commercial practice exists a peculiar phenomenon: the “nominee director.” Walk into any offshore corporate services provider, and you’ll find this product prominently displayed—complete with tiered pricing, standard engagement templates, and reassuring marketing copy about “international best practices.”

The sales pitch is seductive. Need a local director in Cyprus to satisfy regulatory requirements? We have someone. Require a board presence in the BVI without the inconvenience of actual oversight? Consider it done. Want the appearance of independent governance while retaining complete control? That’s precisely what we specialize in.

Yet here lies the paradox that service providers’ glossy brochures carefully avoid: while nominee directors exist everywhere in practice—featured in fee schedules, defined in contracts, and installed on thousands of corporate registers—they exist nowhere in law as the distinct category being sold. Strip away the marketing language and a nominee director is simply a director, subject to precisely the same fiduciary duties, statutory obligations, and personal liabilities as any other.

This is not a minor technical detail buried in legal footnotes. It is the fundamental contradiction upon which an entire industry has been built.

Corporate service providers market nominee directors as a solution to the complexities of cross-border corporate structures. They promise clients the ability to satisfy local presence requirements, maintain privacy, and ensure “appropriate” decision-making—all while their promotional materials studiously avoid explaining how someone can simultaneously be a director (with legal duties to the company) and a nominee (acting on instructions from someone else).

The practice flourishes particularly in secrecy jurisdictions, where obscuring real control and responsibility is not an unfortunate side effect but often the entire purpose. These are the domiciles where corporate formation takes minutes, where beneficial ownership can be layered behind multiple nominee arrangements, and where “independent” directors earn modest fees for signing documents they may never read for companies they will never understand.

For decades, this arrangement operated in comfortable obscurity. Nominees signed. Clients controlled. Service providers collected fees. And when things went wrong, the legal liability theoretically fell on the nominee while the real decision-makers remained hidden behind corporate veils.

But the walls of these secrecy jurisdictions have proven less impenetrable than advertised. Recent legal cases and intensified regulatory scrutiny have exposed the nominee director concept for what it always was: a commercial fiction attempting to override fundamental legal principles. Courts confronting nominee directors have shown neither sympathy for their predicament nor acceptance of their supposed special status.

The question is not whether nominee directors face legal duties—they unquestionably do. The question is whether anyone involved in these arrangements—the nominees themselves, the corporate service providers marketing them, or the beneficial owners directing them—has adequately confronted the legal reality lurking beneath the marketing veneer.

Nominee Directors: From Legitimate Practice to Offshore Exploitation

The term “nominee director” has an established and entirely legitimate lineage in corporate governance. Lord Denning’s observation in Boulting v. Association of Cinematograph, Television and Allied Technicians [1963] 2 QB 606 acknowledged this reality without controversy: “There is nothing wrong in having nominee directors. It is done every day.”

He was describing a commonplace feature of legitimate business. Venture capital firms place partners on portfolio company boards. Family shareholders designate representatives to protect their interests. Strategic investors negotiate board seats as terms of their investment. Joint venture partners appoint directors to oversee their stakes. These arrangements are transparent, occur within regulated jurisdictions, and involve individuals who understand—and generally honor—their fiduciary duties to the corporation.

In these legitimate structures, the term “nominee” simply describes the appointment mechanism: a particular shareholder or class of shareholders has designated this person for the board. The nominee director may well consider the perspective of their appointer and may naturally be sympathetic to those interests. But they understand that their legal duties run to the company, not to their patron.

The Offshore Distortion of “nominee director” concept

What offshore corporate service providers did was take this respectable practice and fundamentally corrupt it. They appropriated the terminology of “nominee director” but inverted its substance. Where legitimate nominee directors operated with transparency and understood their fiduciary obligations, offshore providers marketed nominee directors as a mechanism for:

• Obscuring beneficial ownership rather than transparent representation
• Facilitating hidden control rather than legitimate oversight
• Providing compliant execution of external instructions rather than independent judgment
• Creating liability shields for undisclosed principals rather than accountable governance

The offshore “nominee director” became something categorically different: a person who would serve as director in name while taking direction from someone else—precisely the arrangement that company law has always prohibited.

The Immovable Legal Boundary

Lord Denning made this boundary explicit in Boulting. His statement that nominee directors are acceptable came with an immediate and non-negotiable caveat: “Nothing wrong, that is, so long as the director is left free to exercise his best judgment in the interests of the company which he serves.”

He continued with unmistakable clarity: “But if he is put upon terms that he is bound to act in the affairs of the company in accordance with the directions of his patron, it is beyond doubt unlawful… or if he agrees to subordinate the interests of the company to the interests of his patron, it is conduct oppressive to the other shareholders.”

This is not a gray area or a matter of degree. A director who agrees in advance to follow instructions, who subordinates the company’s interests to those of their appointer, or who fetters their discretion is acting unlawfully—full stop.

The Inherent Impossibility

This creates what might be called the nominee director’s dilemma, eloquently captured by one commentator’s observation that “the life of a nominee director who votes against the interests of his appointing shareholder is neither happy nor long.”

In legitimate corporate structures, this tension is manageable because:

• The appointment is transparent
• The director operates within a regulated jurisdiction with meaningful oversight
• Other directors and shareholders can observe and challenge conflicted behavior
• The director typically has professional reputation at stake
• The appointing shareholder has made a genuine investment and shares interest in the company’s success

In offshore structures, these safeguards evaporate:

• Beneficial ownership is deliberately obscured
• Jurisdiction is chosen specifically for minimal oversight
• The “director” is a low-paid signatory with no real stake in proper governance
• Instructions come through service providers creating deliberate distance
• The principal has specifically structured affairs to avoid personal exposure

Legislative Compromises and Their Limits

Some jurisdictions have attempted to acknowledge commercial realities through legislation. Alberta’s Business Corporations Act permits directors to give “special, but not exclusive, consideration” to the interests of those who appointed them. This represents an honest effort to accommodate the legitimate practice of shareholder-appointed directors who may naturally be sympathetic to their appointer’s perspective.

But even this carefully crafted compromise reinforces rather than undermines the fundamental principle: directors owe primary duties to the corporation. “Special but not exclusive” consideration is a far cry from the offshore model of complete subordination to hidden beneficial owners. The Alberta provision acknowledges that directors may consider their appointer’s interests; it does not permit them to obey instructions or fetter their discretion.

The Corruption of Language

The offshore industry’s genius was linguistic rather than legal. By appropriating the term “nominee director“—which describes a legitimate practice—they created the appearance of legal normalcy for an arrangement that has always been unlawful.

When a venture capital firm appoints its partner to a startup’s board, that is a nominee director operating legitimately. When an offshore service provider supplies a paid signatory to rubber-stamp instructions from an undisclosed beneficial owner, that is not a nominee director in any meaningful legal sense—it is an attempt to create what Lord Denning declared “beyond doubt unlawful.”

The law recognizes nominee directors in their original, legitimate form. What it does not recognize—what it cannot recognize without abandoning fundamental principles of fiduciary duty—is the offshore industry’s version: directors who are nominees in name but puppets in function.

The Judicial Response: Courts Confront the Fiction

The Privy Council: No Special Category of Directors

The law, as articulated by Lord Denning in Boulting, has been consistently cited by courts when confronting the nominee director fiction. Central Bank of Ecuador v Conticorp SA [2015] UKPC 11 provides a striking example of judicial response to the abuse of nominee arrangements.

Michael Taylor served as the sole director of IAMF (Interamerican Asset Management Fund Limited), a Bahamian investment fund, paid merely USD $2,500 annually. The fund’s managing shares were held by nominee companies ultimately controlled by the Ortega family and Conticorp, an Ecuadorian company. Between 1995 and 1996, Taylor executed three transactions that transferred IAMF’s assets worth approximately USD $192 million—including cash, loan portfolios, and shareholdings—to Conticorp in exchange for Global Depository Receipts and shares in a failing Ecuadorian banking group that had little or no real value.

The trial judge acknowledged that Taylor was “in breach of his statutory and fiduciary duty role,” noting pointedly that “it mattered not that his remuneration was USD 2,500 per annum and that he was a nominee director for many other IBCs as was the usual practice in the industry.” The judge cited Lord Denning’s principle from Boulting that a nominee director must remain “free to exercise his best judgment in the interests of the company which he serves.”

However, the trial judge then concluded—remarkably—that the instruction letters from the Ortega family did NOT put Taylor “upon terms that he is bound to act in the affairs of the company in accordance with the directions of his patron” within Lord Denning’s meaning.

The Privy Council reversed this conclusion entirely. While not providing independent analysis of the nominee director doctrine itself, the Board found unequivocally that Taylor had breached his fiduciary duties and that the respondents had dishonestly procured or assisted these breaches. All respondents were held jointly and severally liable for USD $191,953,517.50 plus compound interest totaling USD $381,886,435—effectively doubling the judgment through interest awards.

The case demonstrates that the nominee director label provides no shield when directors systematically subordinate corporate interests to those of their appointers.

Kuwait Asia Bank: No Vicarious Liability Shield

Kuwait Asia Bank v. National Mutual Life Nominees Ltd [1990] 3 WLR 297 addressed a different but related question: whether appointing shareholders could be held vicariously liable for breaches committed by their nominee directors.

The Privy Council was emphatic that appointing shareholders—even those who employed the nominee directors—could not be held vicariously liable for the directors’ breaches. The Court stated: “One shareholder may lock away his paid up shares and go to sleep. Another shareholder may take an active interest in the company, insist on detailed information and deluge the directors with advice. This active shareholder is no more liable than the sleeping shareholder.”

But the Court made equally clear that this provided no comfort to the nominee directors themselves. The fact that directors were employees of the appointing shareholder, or acted on their instructions, made no difference to their legal duties. Breaches of duty by directors occurred “as directors of [the company], as individuals and not as employees of the [appointing shareholder].”

Critically, the Court noted: “As directors the two directors were supposed to ignore the interests and wishes of the bank. They could therefore not raise a defence that they acted upon the instructions of the bank as a defence to the allegation that they were in breach of their duties.”

The law’s position is uncompromising: a director is a director, with all the duties and liabilities that entails, regardless of who appointed them, who employs them, whose instructions they follow, or whose interests they were installed to represent.

Centerra Gold: The Most Egregious Breach

Centerra Gold Inc. v. Bolturuk, 2022 ONSC 1040 (Ontario Superior Court of Justice) demonstrates what happens when the nominee director fiction collides with systematic corporate betrayal. The trial judge found the breaches of fiduciary duty to be “the most egregious he had ever seen.”

Tengiz Bolturuk, a Kyrgyz-Canadian engineer, was appointed to Centerra’s Board in October 2020 as a representative of the Kyrgyz Republic, which held 26.2% of Centerra’s shares through its state-owned entity. Centerra operated a major gold mine in Kyrgyzstan—its flagship asset representing over half its worldwide production.

Despite signing Centerra’s Directors’ Code of Ethics and being personally advised of his fiduciary duties, Bolturuk’s tenure as a director became a masterclass in systematic betrayal. Within weeks of his appointment, he began working secretly with Kyrgyz authorities to facilitate a government takeover of the mine. While serving on Centerra’s Board, he:

• Entered into a $30,000-per-month consulting contract with the Kyrgyz state entity (undisclosed to the Board)
• Wrote to the Kyrgyz Prime Minister offering to “resolve all problems with the mine in favor of the Republic and gain control” within six to eight months, based on information obtained as a Board member
• Attended and presented to a State Commission investigating Centerra while simultaneously sitting on Centerra’s Board
• Recommended that Kyrgyzstan hire consultants to pursue a “final solution” regarding the mine, with success fees up to $100 million
• Created propaganda films critical of Centerra for domestic audiences
• Sent WhatsApp messages stating “we’ll have Centerra on their knees… all this is confidential so that Centerra can’t prepare”

On May 6, 2021, the Kyrgyz Parliament passed Temporary Management Law in a single day—legislation that applied exclusively to Centerra’s mine and authorized seizure of its operations. Bolturuk resigned from Centerra’s Board on May 17, 2021. The very next day, he was appointed External Manager of the seized mine under the new law.

When Bolturuk addressed the Kyrgyz Parliament on May 17, his own words demolished any pretense of having acted as a proper director:

• He stated he had been appointed to the Board “to get to know the activities of this company better” and that it was “a great honour for [him] to serve the national interests of Kyrgyzstan”
• He confirmed that while a director of Centerra, he had been working to advance the interests of Kyrgyzaltyn and the Republic over those of Centerra
• When asked by an MP whether he felt like a “traitor” for divulging Centerra’s confidential information, he replied that he did not
• He stated “we are not talking about Kumtor here, we are talking about Centerra. Take a share in Centerra itself to manage this company, not only Kumtor, but there are two deposits… in Turkey and Canada. We claim everything”

Justice Gilmore found that Bolturuk had systematically breached his fiduciary duties by placing himself in an irreconcilable conflict of interest, usurping corporate opportunities for personal gain, and using his directorship to facilitate the mining operation’s takeover. The Court rejected Bolturuk’s defense that he owed primary loyalty to his nominating shareholder, reaffirming the fundamental principle: all directors owe the same fiduciary duties to the corporation, regardless of who appointed them.

The Court granted a permanent worldwide injunction prohibiting Bolturuk from continuing as External Manager and from disclosing Centerra’s confidential information, and ordered him to pay $310,000 in costs on a scale reflecting the egregiousness of his conduct.

The case stands as a stark warning: the “I was just representing my appointer’s interests” defense holds no more water in corporate law than “I was just following orders” did at Nuremberg.

The Offshore Marketing Illusion

The Pitch to Clients

The offshore marketing pitch to clients is seductive in its simplicity: “Use our director! They’re just a name on paper! They’ll sign what we tell them to sign! You retain control without responsibility!”

Yet this proposition fundamentally misunderstands—or deliberately misrepresents—the nature of directorship under common law systems. As the cases above demonstrate, the law recognizes no category of “paper directors” with diminished responsibilities. The commercial fiction of the compliant “nominee director” provides no legal shield for anyone involved.

The Reality for All Parties

The reality of offshore “nominee directorship” creates dangers for everyone involved:

For the nominee directors themselves: They remain legally liable for their actions regardless of any private arrangements with service providers or beneficial owners. Low fees and assurances of “limited responsibility” provide no protection when courts examine their conduct. As Centerra and Central Bank of Ecuador demonstrate, nominee directors face personal liability, permanent injunctions, substantial cost awards, and potential criminal prosecution.

For the companies: They are left without proper oversight and governance. Decisions affecting millions of dollars in assets are made by individuals with no genuine stake in the company’s welfare, no real understanding of its business, and no independence from hidden controllers. When things go wrong—as they inevitably do—the company has been systematically looted while “directors” signed off on every transaction.

For stakeholders: Creditors, minority shareholders, employees, and other stakeholders rely on directors to fulfill their fiduciary duties. When nominee directors function as rubber stamps for undisclosed beneficial owners, these stakeholders are left without the protection that corporate law is designed to provide.

For the financial system: The integrity of the corporate form depends on directors actually directing. When thousands of companies operate with nominee directors functioning as mere signatories, corporate governance becomes a paper exercise, facilitating everything from tax evasion to money laundering to fraud.

As one commentator notes, these directors are “caught between the devil and the deep blue sea.” But in many cases, they’ve willingly sailed into this storm, lured by the promise of easy money for supposedly risk-free paper-signing. The courts have shown little sympathy for this predicament.

Shadow Directors: The Closing Trap

There is a growing judicial trend to pierce through the nominee director fiction entirely—not by imposing liability on the paper directors, but by holding the beneficial owners themselves directly accountable as shadow directors. This doctrine represents the law’s elegant solution to the offshore services industry’s elegant fraud.

The Concept

The concept is devastating in its simplicity: if you control the company’s decisions by giving directions or instructions that the board habitually follows, you are treated as a director—regardless of whether your name appears on any corporate register. Section 251 of the UK Companies Act 2006 defines a shadow director as “a person in accordance with whose directions or instructions the directors of the company are accustomed to act.”

As established in Re Hydrodam (Corby) Ltd, establishing shadow directorship requires proving four elements:

1. The existence of formal directors on the board
2. The alleged shadow director gave directions or instructions to those directors
3. The formal directors actually complied with such directions
4. A habitual pattern where directors are “accustomed” to acting on these directions

The reality

Offshore providers market nominee directors precisely to create distance between beneficial owners and legal responsibility. “Use our director,” they promise. “You retain control while they take the liability.”

Yet this very arrangement—beneficial owners issuing instructions through compliant nominees—creates the exact factual pattern that establishes shadow directorship.

Consider the typical offshore structure: a client instructs the corporate service provider, who relays instructions to the nominee director, who executes them without question. Courts apply an objective test based on observable behavior. When formal directors consistently act on directions from an undisclosed principal, that principal becomes a shadow director as a matter of law. The nominee director’s formal appointment becomes legally irrelevant.

The Consequences

Shadow directors face the full spectrum of director liability:

• Fiduciary duties to act in the company’s best interests (not their own)
• Personal liability for wrongful trading when the company becomes insolvent
• Disqualification from serving as directors for up to 15 years
• Criminal prosecution for fraudulent trading
• Civil liability to creditors, shareholders, and the company itself

Critically, the professional adviser exemption—which protects lawyers and accountants giving advice “in a professional capacity”—provides no shelter for beneficial owners directing corporate affairs through nominees. Courts distinguish sharply between advice and instruction, between consultation and control.

The Evidentiary Trail

Recent cases demonstrate judicial willingness to look past corporate structures to identify shadow directors. In insolvency proceedings particularly, liquidators examine the shadow behind nominee directors with forensic intensity. Email trails, payment instructions, corporate resolutions, service provider communications—all become evidence of the habitual pattern of direction and obedience that establishes shadow directorship.

The offshore industry’s response has been to add yet another layer: “independent” nominee directors who ostensibly make their own decisions. But independence cannot be asserted—it must be demonstrated through actual autonomous decision-making. When investigations reveal that the “independent” director consistently executed the beneficial owner’s instructions, the shadow directorship finding becomes inevitable.

Substance Over Form

The fundamental principle is inescapable: substance prevails over form. Those who exercise real control over corporate affairs bear corresponding legal responsibility, regardless of the elaborate structures constructed to obscure that control.

You cannot avoid responsibility by interposing a nominee between yourself and the company you control. The law simply looks through the nominee to find you standing in the shadows—and holds you accountable as the director you always were.

The choice facing beneficial owners is stark: either relinquish genuine control to truly independent directors (accepting that they may make decisions contrary to your interests), or accept that you are functioning as a director with all the duties and liabilities that entails. The middle ground that offshore providers market—control without responsibility—simply does not exist in law.

Here’s an excellent additional section on recent enforcement cases to conclude your article:

The Reckoning: Global Enforcement Against Nominee Director Abuse

The theoretical risks discussed above are no longer merely academic concerns. Jurisdictions worldwide have launched aggressive prosecutions against nominee directors and the corporate service providers who supply them, fundamentally altering the risk calculus for everyone involved in these arrangements.

Singapore: The Most Aggressive Enforcement Jurisdiction

Singapore has emerged as the global leader in prosecuting nominee director abuse, particularly following a massive S$3 billion money laundering scandal in 2023 that exposed the systematic misuse of shell companies with compliant nominee directors.

Public Prosecutor v. Zheng Jia (2025): The New Sentencing Framework

In January 2025, the Singapore High Court established a revolutionary sentencing framework that treats imprisonment as the default punishment for nominee directors who breach their statutory duty to exercise reasonable diligence. The case involved Zheng Jia, a chartered accountant who served as nominee director for 384 Singapore companies without exercising any oversight whatsoever.

The District Court initially imposed a modest S$8,500 fine. The High Court rejected this as wholly inadequate and substituted a 10-month imprisonment sentence. More significantly, the Court created a structured framework with custodial sentences starting at a minimum of four months for basic breaches, escalating based on aggravating factors.

The judges distinguished sharply between directors who make negligent errors while attempting to fulfill their duties and those who intentionally abdicate responsibility from the outset. Zheng fell squarely into the latter category—his business model was specifically designed to enable clients to evade Singapore’s requirement for a locally resident director, essentially offering companies that could be used for illicit purposes with no questions asked.

The Court’s reasoning was unequivocal: “The role of a nominee director cannot be reduced to a mere formality or rubber-stamping exercise. Those who accept directorships as a business while deliberately closing their eyes to their responsibilities must face meaningful criminal sanctions.”

The Interconnect Consultancy Prosecutions (2024)

Multiple prosecutions emerged from investigations into Interconnect Consultancy, a corporate service provider whose directors arranged nominee directorships for shell companies that laundered nearly US$36 million in scam proceeds. The cases reveal the systematic nature of the abuse and the courts’ increasingly severe response.

Bernard Chng Kok Leng and Tay Chee Seng were sentenced to six weeks and four weeks’ jail respectively in November 2024. Chng served as nominee director of 52 shell companies, while Tay became nominee director of 57 companies. They received S$250 every six months per company—remarkably, they were promised they could become directors of a new company every single day, generating monthly “income” of S$7,500.

The facts reveal the toxic bargain at the heart of nominee directorship: minimal compensation for signing documents, deliberate ignorance of company affairs, and assurances from service providers that “all necessary checks” would be conducted. When Chng and Tay voiced concerns about potential money laundering to Interconnect’s principals, they were assured the firm would handle compliance. They provided only their personal details and never oversaw any company affairs or bank transactions.

Shell companies where they served as directors received over US$14.6 million in scam proceeds, including a single US$10 million transfer from Belgian company Grib Diamond NV that remains unrecovered. The prosecution emphasized that by offering themselves as directors-for-hire without any genuine oversight, they created the very vehicles that enabled large-scale fraud.

Er Beng Hwa’s case demonstrates the extreme end of nominee director negligence. He served as nominee director of 186 companies—receiving only S$50 per year per company, plus S$50 for opening bank accounts or signing documents. One of his firms laundered US$2.36 million obtained from overseas fraud victims. The prosecution stated it was “almost impossible to exhibit greater negligence as a director” than Er demonstrated by “absolutely washing his hands clean of the affairs of the company.” He was fined S$4,000 and disqualified from serving as a company director for three years.

Interconnect Consultancy’s principals, Lee Chia Yen and Lee Ay Ling, face their own charges for orchestrating the scheme.

Abdul Ghani bin Tahir v. Public Prosecutor (2017): Establishing Criminal Liability

This landmark case established that nominee directors could face criminal prosecution for money laundering offences based on negligence alone—not requiring proof of actual knowledge or intent. Abdul Ghani, a chartered accountant providing corporate secretarial services, acted as sole resident director for three companies where foreign directors controlled the bank accounts and used them for fraudulent transfers.

The court held that a nominee director could be convicted for a company’s money laundering acts as long as the prosecution proves the company is guilty—prior conviction of the company itself is unnecessary. The director would be liable if they were negligent, reckless, or consented to the company’s acts. Abdul Ghani was sentenced to 12 months’ imprisonment and fined S$50,000.

Singapore’s Legislative Response

Singapore’s Corporate Service Providers Act 2024, which came into force in June 2025, represents the most comprehensive regulatory framework globally for controlling nominee director abuse. The Act:

• Requires all corporate service providers to register with the Accounting and Corporate Regulatory Authority (ACRA)
• Prohibits individuals from acting as nominee directors “by way of business” unless arranged by a registered CSP
• Mandates fit and proper assessments of all nominee directors
• Imposes penalties up to S$100,000 on CSPs for non-compliance
• Requires CSPs to maintain registers of nominee directors and shareholders

The combination of aggressive criminal prosecutions and comprehensive regulatory framework signals Singapore’s determination to eliminate the nominee director model entirely.

The Seychelles: Raid on Alpha Consulting

In November 2023, an investigation by the International Consortium of Investigative Journalists (ICIJ), Finance Uncovered, BBC, and Seychelles Broadcasting Corporation traced more than 900 UK-registered firms set up using nominee directors linked to Seychelles-based Alpha Consulting. The investigation revealed that Alpha’s office administrator and cleaner were among dozens of individuals who allowed their names and signatures to be used on corporate documents so real owners could remain anonymous.

Companies set up by Alpha were linked to “alleged large-scale corruption, a fugitive oligarch, and an unlicensed online pharmacy.” Within hours of the investigation being published, Seychelles police and financial regulators raided Alpha’s offices and seized hard drives and documents.

Alpha Consulting’s founder, Victoria Valkovskaya, defended the practice by stating that using nominee directors to hide true owners was “not something new or illegal in the industry” and that Alpha was not responsible for the actions of the British companies. This defense—essentially arguing that systematic facilitation of beneficial ownership concealment is standard industry practice—failed to persuade authorities.

In March 2025, the Financial Services Authority of Seychelles revoked all of Alpha Consulting’s licenses. The company has since shut down operations entirely.

The Alpha case demonstrates how investigative journalism, combined with coordinated regulatory action, can rapidly dismantle even well-established offshore service providers who rely on the nominee director model.

The Panama Papers: Mixed Results

The prosecution outcomes from the Panama Papers scandal reveal both the potential and the limits of holding offshore service providers accountable.

In June 2024, a Panamanian court acquitted all 28 individuals charged with money laundering in connection with the Panama Papers, including Jürgen Mossack and the late Ramón Fonseca, co-founders of Mossack Fonseca. Defense lawyers successfully argued that many defendants were only nominal directors of companies created and sold by Mossack Fonseca, therefore they “did not maintain any control over the companies and were not the final beneficiaries.” Judge Baloisa Marquinez found the evidence “insufficient” to establish criminal culpability under Panamanian law.

However, German authorities issued an international arrest warrant in October 2020 for the two founders on charges of accessory to tax evasion and forming a criminal organization, demonstrating that home-country prosecution remains viable even when offshore jurisdictions prove reluctant to act.

The divergent outcomes highlight a critical challenge: while nominee directors and beneficial owners may face liability in jurisdictions with robust enforcement (Singapore, UK, Canada), prosecutions in the offshore domiciles themselves often founder on weak evidence requirements and courts sympathetic to the “we were just providing standard services” defense.

The Cayman Islands: Clarifying Standards

While the Cayman Islands has not pursued the aggressive criminal enforcement seen in Singapore, its courts have clarified the liability standards that apply even in offshore jurisdictions.

Goodman v. DMS Governance Ltd (2020)

The Cayman Islands Court of Appeal addressed whether an employer providing nominee director services could be held vicariously liable for breaches committed by its employee-directors. Ms. Cummings, an employee of DMS Governance, served as director of the Tangerine fund, and investors alleged losses due to her acts and omissions.

The Court of Appeal confirmed the fundamental principle that duties owed by a director are owed in their capacity as director of that company, regardless of other employments. However, the court went further in defining what constitutes actionable breach.

The court distinguished between “mere negligence” and “wilful neglect or default.” Allegations of repeated failures to conduct due diligence in numerous loan transactions, where the director appreciated her conduct might breach duties but consciously decided to proceed anyway, were held to constitute “wilful neglect”—a finding that exposed the director to personal liability.

Significantly, the court emphasized that even in the Cayman Islands—where corporate service provision is a major industry—directors who call themselves “nominees” remain legally bound to exercise independent judgment and full fiduciary duties. Any attempt to deliberately subordinate a director’s judgment to external parties through powers of attorney or informal instructions may result in breach of fiduciary duty, regulatory sanctions, and personal liability.

International Regulatory Standards: FATF’s Response

The Financial Action Task Force (FATF) has responded to the systemic abuse of nominee arrangements by amending Recommendation 24, which now specifically addresses nominee director and shareholder arrangements.

Countries must now implement at least one of three mechanisms:

1. Transparency requirements: Mandating disclosure of nominee status and nominator identity in public or accessible registers
2. Licensing requirements: Requiring nominees to be licensed professionals or members of regulated professions subject to anti-money laundering obligations
3. Prohibition: Banning nominee arrangements entirely

Singapore has effectively implemented all three mechanisms simultaneously—the most aggressive response globally. Other jurisdictions are following suit, though at varying speeds.

The Crown Dependencies: Evolving Approaches

The Crown Dependencies (Jersey, Guernsey, and Isle of Man) have been urged to strengthen enforcement against nominee director abuses through enforceable codes of conduct for directors, company administrators, and trustees.

Remarkably, the Isle of Man has abolished the concept of nominee directors entirely. Each appointed director is now individually responsible for performing all duties assigned by law, with no recognition of any “nominee” status that might suggest diminished responsibility.

The Pattern Emerging

Several clear patterns emerge from this global enforcement wave:

Courts reject the nominee defense: In every jurisdiction with meaningful enforcement, courts have refused to accept “I was just a nominee” as a defense to breach of duties. Whether in Singapore, Canada, the UK, or Cayman Islands, judges emphasize that accepting a directorship—even for minimal compensation and on the understanding that others control the company—creates full legal responsibility.

Criminal liability is real: Nominee directors now face not just civil liability for breaches of duty, but criminal prosecution for money laundering, wrongful trading, and facilitating fraud. Singapore’s framework makes imprisonment the default sentence, fundamentally changing the risk-reward calculation.

Service providers face liability: While prosecuting individual nominee directors sends a message, authorities increasingly target the corporate service providers who systematically supply compliant nominees. The revocation of Alpha Consulting’s licenses and the prosecution of Interconnect Consultancy’s principals demonstrate that the business model itself is under attack.

Beneficial owners cannot hide: The shadow director doctrine ensures that beneficial owners issuing instructions through nominees face personal liability as directors. The fiction that interposing a nominee creates legal distance has been thoroughly demolished.

“Industry standard practice” is not a defense: Multiple defendants have argued that nominee director services are standard industry practice and therefore legitimate. Courts have rejected this argument categorically—the prevalence of a practice does not legitimize it when that practice involves systematic abdication of legal duties.

Low compensation increases rather than decreases liability: Defendants often point to modest fees (S$50 per company annually, $2,500 per year) as evidence they were not truly responsible. Courts view low compensation as evidence of a business model based on volume provision of directorships without genuine oversight—making the breach more rather than less culpable.

The Message to All Participants

For nominee directors: The days when you could sign documents for modest fees with assurances of “no real responsibility” are over. Courts worldwide now impose imprisonment, substantial fines, and director disqualification orders. The promise of easy money has been revealed as exposure to catastrophic liability.

For beneficial owners: You cannot avoid director liability by hiding behind nominees. The shadow director doctrine looks through corporate structures to hold you accountable for control you actually exercise. Email trails, payment instructions, and corporate resolutions create evidence of the instruction-and-obedience pattern that establishes shadow directorship.

For corporate service providers: The business model of supplying compliant nominee directors is under existential threat. Singapore’s framework effectively prohibits the practice except under strict regulatory oversight. Other jurisdictions are following suit. Regulatory licenses can be revoked, principals can face prosecution, and the reputational damage from high-profile cases like Alpha Consulting can destroy firms overnight.

The nominee director fiction is collapsing under coordinated global enforcement. What offshore providers marketed as a legitimate service enabling “privacy” and “compliance” is being systematically exposed as a mechanism for facilitating money laundering, tax evasion, and fraud. Courts have made clear: there are only directors, with all the duties and liabilities that entails. The sooner all participants acknowledge this legal reality, the sooner they can avoid the criminal and civil consequences that are now inevitable for those who persist in the fiction.

Please see also article Fiduciary Services: Trust Arrangements Under Polish Law