Should I accept nominee director appointment?

Risks vs rewards

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I have been approached by a former client to act as a nominee director for his new company. He has brought in a significant deal to his employer through his own contacts and they have an arrangement to split the profit via a separate limited company.

My client does not want to appear as a director as it may cause commercial risks and conflict with other business relationships and other staff within the company, hence the reason for the nominee. He understands that he can't get around the PSC requirements.

I am happy with my DD/MLR procedures etc. and trust this guy as much as you can trust anyone in business having previously dealt with him.

I have negotiated a good fee for this service as I have explained the risks and responsibilities I am taking on. I have also made it clear that should there be any conflict, my duty is to the company and not him.

I think I have done everything properly but for some reason I am still nervous! Am I missing something???

 

Replies (21)

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By forrest gump
16th Jun 2017 11:28

hi. I wouldn't accept under any circumstances or reward because as a director i would under Companies Act be liable for criminal offences if breaches of directors; duties (since they are making decisions not you and you wouldn't know anyway). There is no such a thing as nominee director in UK Companies Law and I am not sure if indemnities could be valid (it's a legal matter). that is my view.

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By accountant78
16th Jun 2017 12:28

Thanks Forrest.

I guess nominee may be the wrong term - I will have full control of the invoicing, bank account, payments to suppliers etc so will have some involvement, just not in the operational side.

I will obviously be acting in good faith throughout but need to be clear of the risks.

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Replying to accountant78:
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By Mr_awol
16th Jun 2017 14:16

accountant78 wrote:

Thanks Forrest.

I guess nominee may be the wrong term - I will have full control of the invoicing, bank account, payments to suppliers etc so will have some involvement, just not in the operational side.

Arguably, it is the operational side which carries the biggest risks! (depending of course what the company does).

If it takes schoolkids on trips abroad, for example, and the 'client' loses one -where do you think that leaves you? Standing safe and sound telling them that although youre the company's director, you only do the admin?

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David Winch
By David Winch
16th Jun 2017 12:58

I would advise you not to do this. At best, it looks like concealment of the truth by using a company.
Worst case outcome is that you could personally be subject to imprisonment & bankruptcy.
David

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By accountant78
16th Jun 2017 15:58

I understand and appreciate the warnings but thankfully the activity is pretty low risk (I think?!) - buying and selling online advertising space.

I am probably being naive but I am not seeing huge risks ahead.

In terms of concealment of the truth, again I don't see this as being an issue - I don't think there is any duty to declare other interests to professional contacts or work colleagues?

I really appreciate the contributions as they do make you think!

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Replying to accountant78:
Stepurhan
By stepurhan
16th Jun 2017 15:51

accountant78 wrote:
In terms of concealment of the truth, again I don't see this as being and issue - I don't think there is any duty to declare other interests to professional contacts or work colleagues?

No there isn't. But this is going further than just not declaring another interest. This is actively concealing that interest.

It is ultimately up to you, but I think you at least need to properly understand why the secrecy is thought necessary. The reasons you have quoted above are a bit on the vague side. What are these commercial risks arising from this arrangement? Why is it being passed through a company instead of simply being paid as a bonus? For that matter, what would alert other staff to the arrangement in the first place? Are they in the habit of checking the officers of every supplier their employer has?

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By ireallyshouldknowthisbut
16th Jun 2017 16:19

Have I misread this. or has this guy influenced his employer to use suppliers (his mates) who are happy to cut him in on a share of the profits, but want to ensure his employer is oblivious to the connections?

or are you saying his EMPLOYER is paying him a share of the profits?

If the former, this sounds suspiciously like your client has induced his employer to pay over the odds for good/services to the extent his contacts are making so much money, they can cut him in on a big commission.

if the latter, do you have a PAYE/bonus issue?

Either way this guy doesn't sound very trustworthy to me.

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Replying to ireallyshouldknowthisbut:
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By accountant78
16th Jun 2017 16:40

As far as I understand it he is effectively acting as a broker in that he can source the advertising space through his contacts and sell it on to his employer who then sells it on again at a reasonable profit.

The space is in a sector of the industry that his employer doesn't currently operate in so they are happy with the arrangement. He wants to do it through a company as it may be something he can operate as a stand alone business in the future.

I need to probe some more and appreciate everyone's input!

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Replying to accountant78:
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By Tax Dragon
19th Jun 2017 09:56

accountant78 wrote:

...his employer...are happy with the arrangement."

You've spoken with the employer?

I'm no legal expert (and I'm trying to remember whether the scenario you sketch was one of the examples from my Bribery Act training), but I note you are nervous and most respondents have urged caution/use of a barge pole with a plastic bag on the end. That should tell you something.

Out of interest, why do you think the former client has approached you? Why did he become a former client?

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Replying to Tax Dragon:
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By accountant78
05th Jul 2017 15:28

Out of interest, why do you think the former client has approached you? Why did he become a former client?

[/quote]

Only became a former client because he sold his (successful) marketing company, had some time off and then went in to employment.

I would like to think he approached me because I previously gave him some good advice in relation to his business sale and he trusts that I have the right skills to help run his business. I may be wrong! ;)

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By North East Accountant
21st Jun 2017 11:09

Trust your gut instinct. You are nervous enough to post on here and that should be enough to say no.

Under no circumstances would we ever accept such instructions. Period.

Also, David Winch is a poster whose opinions you should highly respect and you would be a fool to ignore his advice.

You have been warned and if it goes pear shaped it is entirely down to you.

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By North East Accountant
21st Jun 2017 11:10

Trust your gut instinct. You are nervous enough to post on here and that should be enough to say no.

Under no circumstances would we ever accept such instructions. Period.

Also, David Winch is a poster whose opinions you should highly respect and you would be a fool to ignore his advice.

You have been warned and if it goes pear shaped it is entirely down to you.

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By andy.partridge
21st Jun 2017 11:24

This sounds like the storyline if ever a bunch of accountants decided to remake (sorry, re-envision) the film Body Heat.

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Replying to andy.partridge:
Red Leader
By Red Leader
21st Jun 2017 11:58

andy.partridge wrote:

This sounds like the storyline if ever a bunch of accountants decided to remake (sorry, re-envision) the film Body Heat.


Saw it when it came out. Enjoyed it at the time though not sure if it would look so good second time round. Once you've seen Double Indemnity, difficult to better that.
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Replying to andy.partridge:
Stepurhan
By stepurhan
21st Jun 2017 11:58

I'd ask for the William Hurt role, but I think I'd want to know who was taking the place of Kathleen Turner first.

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Replying to stepurhan:
Red Leader
By Red Leader
21st Jun 2017 14:48

stepurhan wrote:

I'd ask for the William Hurt role, but I think I'd want to know who was taking the place of Kathleen Turner first.


I think your co-star would too!
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Replying to Red Leader:
Stepurhan
By stepurhan
21st Jun 2017 15:30

You mean that they'd all leap at the chance if they knew they'd get to work with me, right? ;-)

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Red Leader
By Red Leader
21st Jun 2017 11:56

Noooooooo!!!!

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By andy.partridge
21st Jun 2017 15:10

As you both know the film, do you see the similarity with the OP over why the KT character 'appointed' the WH
character in the first place?

The OP may be flattered by the ex-client's attention, but perhaps he should feel insulted.

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Red Leader
By Red Leader
21st Jun 2017 16:15

It's probably best we don't dig too deeply into personal parallels between that film and present circumstances. It's steamy enough already here in my office in the deep south!

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By SteveHa
06th Jul 2017 09:02

If David Winch counsels against something like this, that would be good enough for me to say "No".

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