Why Every Nominee Director Needs D&O Insurance (with claims examples)

When your business appoints a nominee director, you’re asking someone to legally represent your company at the highest level - while assuming none of the operational control.

But here’s the catch: the law doesn’t distinguish between a hands-on managing director and a nominee director. In the eyes of the regulators (like ACRA or IRAS), a director is a director - and personal liability follows that title.

Let’s talk about what’s really at stake.

Claim 1: Regulatory Investigation by IRAS

Company Z's nominee director, who had no involvement in daily operations, was pulled into an official IRAS investigation for tax evasion.

• Allegation: Suspicion of underreported tax liabilities

• Outcome: Director had to attend interviews, submit documents, and engage legal representation

• Cost: SGD 120,000 in legal fees — paid by D&O policy

• Result: IRAS dropped the case, but the costs were already incurred

Claim 2: Defamation Between Directors

A former director sued the CFO (a board member) of Company X for allegedly making defamatory statements about misappropriated funds.

• Claim: SGD 800,000 in damages

• Settled at: SGD 250,000, plus SGD 80,000 in defense costs

• Covered by D&O policy — without it, the director could have faced personal ruin

Claim 3: Shareholder Oppression

Minority shareholders of Company Y sued the board (which included a nominee) for:

• Withholding company information

• Skipping AGMs

• Diverting opportunities for personal gain

Though no financial payout was ordered, legal defense cost over SGD 150,000 — fully covered by D&O

Why This Matters to You as a Nominee Director

You may think:

But the law doesn’t see it that way. You are personally liable for breaches of duty, statutory compliance, mismanagement, and more — even if you were just a passive nominee.

And when something goes wrong, you’ll be:

• Named in lawsuits

• Summoned by regulators

• Responsible for your own legal bills, unless protected

What D&O Insurance Covers

✔ Legal defense against civil, criminal, regulatory claims 

✔ IRAS, ACRA, and MOM investigations 

✔ Allegations of breach of fiduciary duty 

✔ Defamation, negligence, and shareholder actions 

✔ Personal asset protection for you and your family

Final Word

D&O isn’t just for large corporations. It’s a lifeline for professionals like you - who take on responsibility without control.

Requiring your clients to buy this coverage to protect you in the discharge of your duties is not just smart - it’s essential. And they’ll thank you later if a claim ever happens.

Idea You Can Use

Author : Lionel Ling

If you have read this and would like a comprehensive overview of what you could get, get in touch here.