A nominee director is someone who in fact is renting his or her name to you. In Panama all corporations require three officers: President, Secretary and Treasurer. The names of these 3 officers appear on file at the Public Registry. It is standard practice, however, to employ nominees for this role.

Nominees are typically trusted employees of the law firm involved in the incorporation process. In theory it would be possible to use corporations or non-resisdents in this role, as is typical in other offshore jurisdictions, but this is not favorably viewed by the Panamanian establishment. It is generally preferable in terms of achieving a quick, smooth and hassle free incorporation to use three Panamanian physical persons as nominee directors.

Most nominees are officers of hundreds or even thousands of corporations, so they do not play any active role in management. In some cases they may be able to sign papers on behalf of the beneficial owners (clients). However, this can expose them to legal liability issues so typically they will grant a full, unlimited power of attorney to the client (or someone else chosen and trusted by the client) to run all day to day business of the company. As such, these people are pure nominees and have no involvement whatsoever in the corporation besides renting their names.

In other words, the name of the nominee director is used in place of yours for the incorporation documents. They are also taking the positions on paper of the company directors. The term of straw man or front man has also been used to describe someone who is acting as the nominee.

Nominee Shareholders

Additionally, in the case of a nominee that who is also listed as a shareholder, then that person also have the related ownership responsibilities. However, bearer shares are typically used in Panama so there is little need for nominee shareholders.

Why use a nominee director?

The basic function of the nominee director is to shield working executives of limited and other companies from the public disclosure requirements that exist in Panama. It is a legal device designed to preserve the privacy of an individual. It is designed to help a person who would rather not disclose their interest or association with a given corporation or Private Interest Foundation. Anyone performing a search on the Public Registry website of a company with nominee directors would be unable to discover the true management of the company. This device has been institutionalized in Panama over decades, and provides employment to quite a substantial number of Panamanian citizens. It is no doubt for this reason that Panama company law requires three officers and this has remained unchanged since the 1920s, while in most jurisdictions company law has been updated to allow for companies to be managed by a single administrator.

The difference between Nominee Directors and Professional Directors

Professional director is a term normally used to refer to nominee directors who have been specifically hired to take on an active role in the management of the company. Unlike nominee directors who simply rent their names and sign documents prepared by lawyers, a professional director is typically either a professionally qualified person such as a lawyer, or a well-known businessman with many years experience. (Retired businesspeople frequently take on such positions)

The underlying purpose is broadly similar - to disguise the underlying ownership and control. But the professional management are expected to demonstrate active participation in the day-to-day affairs of the company. They may write letters, make public appearances, and hold official meetings where company business is decided upon.

Professional directors add credibility to a company. For example if you hire a respected businessman with an established track record as President, a qualified lawyer as Secretary, and a qualified accountant as Treasurer, the company has effectively bought instant credibility with banks, suppliers and even foreign tax authorities. Such third parties know that respectable professional people have done their due diligence and will not risk their oustanding reputations by lending their names to a scam operation. And in exercising management control of the company, they will not allow things to go haywire.

Professional directors, needless to say, charge much higher fees than nominee directors. We can make introductions to such persons on an individual basis. Typically professional directors will not grant unlimited Powers of Attorney to clients.

Of course, the client through the ownership (typically bearer shares or a Private Interest Foundation) maintains ultimate control. The owners of a company may fire the management at any time.