In the Philippines, it is common practice for foreign investors to use nominee shareholders to hold shares in a local company. This is because the Constitution and other laws restrict foreign ownership of certain industries and activities, and a nominee shareholder provides a way around these restrictions.
However, just having a nominee shareholder is not enough to ensure the protection of your investment. It is crucial to have a nominee shareholder agreement in place to safeguard your interests and avoid future disputes.
A nominee shareholder agreement is a legal contract between the actual owner of the shares (the “beneficial owner”) and the nominee shareholder. It outlines the terms and conditions of the arrangement, including the responsibilities and rights of each party.
Here are some key provisions that should be included in a nominee shareholder agreement in the Philippines:
1. Identifying the parties: The agreement should clearly state the full names and contact details of both the beneficial owner and the nominee shareholder.
2. Shareholding structure: The agreement should specify the number of shares held by the nominee shareholder, the nature of those shares (e.g. common or preferred), and any restrictions on the transfer of those shares.
3. Obligations of the nominee shareholder: The agreement should detail the duties and responsibilities of the nominee shareholder, including holding the shares for the benefit of the beneficial owner and voting in accordance with the beneficial owner`s instructions.
4. Protection of the beneficial owner`s interests: The agreement should include provisions that protect the interests of the beneficial owner, such as requiring the nominee shareholder to disclose any potential conflicts of interest or to provide regular reports on the status of the shares.
5. Termination provisions: The agreement should outline the circumstances under which the arrangement can be terminated, such as by mutual agreement, expiration of a fixed term, or breach of the agreement.
Having a well-drafted nominee shareholder agreement in place can help prevent misunderstandings and disputes between the parties, and ensure that your investment is adequately protected. It is advisable to seek the advice of a lawyer experienced in corporate law to assist you in drafting or reviewing such an agreement.