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Nominee Director vs Section 137 Bond for Company Formation for Non-Residents

nominee director vs section 137 bond

Ireland is a popular destination for foreign entrepreneurs to form companies. The percentage of foreign entrepreneurs opting for company formation in Ireland in the past year was around 30% – according to a report by the Irish Department of Enterprise, Trade and Employment, which found that there were over 3,000 new companies formed by foreign entrepreneurs in Ireland in 2022.

However, company formation in Ireland for foreigners can be a daunting task, particularly when it comes to meeting the requirement of having a local director. Most foreign entrepreneurs are hard-pressed to choose between assigning a nominee director vs getting a Section 137 Bond.

In this blog post, Chern & Co experts examined the advantages and potential risks associated with assigning a nominee director vs Section 137 bond. At the end of the road, you will have a clear image of what option is your best choice for an Irish Ltd. 

Who is a Nominee Director in an Irish Company

A Nominee Director is a local representative appointed to fulfill the statutory requirement of having a local director in an Irish company. This individual holds a director’s position on paper, ensuring compliance with Irish law, while the actual control and management of the company remain with the non-resident owners. 

nominee director vs section 137 bond
Source: Unsplash

Advantages and Risks Associated with Hiring a Nominee Director

Advantages of Hiring a Nominee Director

Enhanced credibility: One of the primary benefits of engaging a Nominee Director is the substantial boost it provides to your business’s credibility. This increased trustworthiness significantly impacts how your company is perceived by entities such as the Companies Registration Office (CRO) and Revenue authorities.. 

Risks to Be Aware Of:

Reputation and Trust Issues: Your company’s reputation could be at risk if the nominee director becomes associated with questionable or fraudulent activities.

Compliance and Legal Risks: There’s a legal responsibility that comes with being a director, and failure to comply with local laws and regulations can have serious consequences for your business.

The risks of employing a nominee director for your Irish Ltd can be mitigated by choosing a reputable nominee director service provider like Chern & Co. We have an extensive contact base of nominee directors ready to act in the best interest of your company.

What is Section 137 Non-EEA Resident Directors Bond for an Irish Company

A Section 137 Non-EEA Resident Directors Bond is an insurance bond that non-resident directors can obtain as an alternative to appointing a local director. This bond provides a form of financial assurance to the Irish authorities for two years, ensuring that any financial liabilities are met during this time.

Pros and Risks Associated with Purchasing Insurance Bond

What are the advantages of purchasing a 137-section bond?

Full Privacy: Your company’s internal affairs remain private without third-party involvement.

No Headache: Unlike a nominee director, an insurance bond doesn’t bring along the risk of delayed responses or approvals

What are the Risks? 

Credibility issues: Companies lacking an Irish or at least an EU director may face credibility challenges in the eyes of the CRO, Revenue, and bank representatives.

nominee director vs Section 137 Bond
Source: Unsplash

Nominee Director vs Section 137 Bond: Which Option is Right for You

Nominee DirectorInsurance Bond
Role in a companyHas the same legal responsibilities as any other director of a company, however, has no decision-making power. They are required to act in the best interests of the company and to comply with all applicable laws and regulations.Does not have any role in the management of the company
Cost1100 Eur per Year2000 for two years*
Risks associatedNominee directors may not have a genuine stake or vested interest in the company’s success or failure and so may not act in the company’s best interests.Insurance bond holders are highly likely to get a refusal in business account opening.
Nominee director vs section 137 bond comparison table

*Nominee director services are slightly more expensive compared to insurance bonds. The cost difference, however, can be justified given the level of credibility and the advantages of having an engaged and dedicated director. It’s important to remember that whether your company conducts business within the state or not, having an Irish Nominee Director or an insurance bond is essential as long as your company is registered in Ireland.

To Summarise

Your choice between a Nominee Director and a 137 Section Bond should align with your unique circumstances. If you are a non-resident shareholder seeking confidentiality and enhanced credibility, a Nominee Director is typically the superior choice. However, if you have concerns about the potential risks associated with a Nominee Director, such as dedication and vested interest, then an insurance bond might be a safer option.

In the end, it’s worth noting that an Irish Nominee Director significantly enhances your business’s trustworthiness with local authorities. This advantage opens doors to more seamless business bank account openings, making it a compelling choice for most non-resident entrepreneurs.

If you’re still wondering what the right option for your Irish Ltd: nominee director or Section 137 bond, don’t hesitate to ask Chern & Co. Our experts will help you make the right choice based on the needs of your company.

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