Finding a trustworthy director in the Czech Republic

Nominee services are used when a nominee (fiduciary) looks after the assets on someone else’s behalf and acts in their best interest. Such a person is usually nominated based on a contract between the client and a professional provider, which means the nominee is not someone from the client’s staff.

The trust element

The nominee director service, which is probably the most common type of nominee service, is typically provided by independent trust firms or individuals. Clients recruit from various industries and business segments and use this service for different reasons. As the element of trust is of great importance in this relationship (which is why providers of such services are often referred to as “trust firms”), clients tend to look for reputable pro­viders with a proven track record.

Reputable trust firms serve as a sort of guarantor in this relationship, as they have adequate procedures in place ensuring that their directors will act strictly on the client’s instructions only. This means that the client decides what contract to enter into and the director, in cooperation with the client’s lawyers, tax advisers and other professionals, executes the client’s wishes. It is for this reason that clients usually reach out to trust firms for this type of nominee service.

Why and when to use a nominee director

Why use a nominee director when many companies use their own staff? Why not use your own people when finding the right provider is not always an easy task?

To answer these questions, some commonly cited reasons for choosing this service are provided below.

• Local management and control – If the client has its headquarters abroad, appointing a foreigner as the director of a local company might lead to speculation with respect to where the real management and control are being executed. This risk is mitigated by appointing a professional local director who lives in the same country in which the company is registered.
• Independence and responsibility – Having an independent trust firm with professional indemnity insurance and director and officers liability insurance appropriate to the size of its clients and which can also handle back-office management (accounting, payroll, compliance, etc.) is much more effective than using one’s own employee, who not only has to deal with directorship tasks in addition to his/her primary duties, but may also go on holiday, become ill, leave the company unexpectedly or pursue his/her own interests.
• Limited presence in the country – This is typical for inward investors who do not need many people locally and manage their investments in multiple countries from their headquarters abroad. Having a local director with a proven track record who knows local legislation and the business community, can recommend local experts in other service areas and is used to daily operational matters such as how banks, the tax office and other governmental authorities operate saves the client time and resources and is more effective than having an expatriate dealing with these issues in multiple jurisdictions at once.
• Cost – It is cheaper to outsource an experienced local director than to move one’s own full-time employee with the required seniority and experience to a foreign country to serve as a director.

Summary
Nominee services are not a magic bullet that eliminates all concerns and problems associated with a new investment. However, if used in the right way and with the right partner, they can save a lot of time and financial resources and add an extra dimension of comfort and corporate governance.