NOMINEE ARRANGEMENTS: A LEGAL OVERVIEW FOR BUSINESSES IN ARMENIA

INTRODUCTION

Nominee Directors and Shareholders are often used by Foreign Investors to maintain privacy and ease administrative tasks while conducting business in foreign jurisdictions. In Armenia, the concept of Nominee Directors and Shareholders is commonly employed to facilitate foreign investment while ensuring compliance with local laws.

Nominee Director: A nominee director is appointed to act as a director of a company on behalf of the beneficial owner, without holding any significant decision-making power or ownership interest in the company.

Nominee Shareholder: A nominee shareholder refers to an individual or entity that holds shares in a company on behalf of the actual or beneficial owner. The nominee shareholder is listed in the official records of the company, but does not exercise ownership rights such as voting or receiving dividends. Instead, the beneficial owner retains all economic benefits and control associated with the shares.

LEGAL FRAMEWORK GOVERNING NOMINEES IN ARMENIA

The Armenian legal framework allows for the use of Nominee Directors and Shareholders. Here are some key aspects:

• Registration Requirements: Companies in Armenia must register the identities of directors and shareholders with the Armenian State Register of Legal Entities. However, if a nominee arrangement is used, the nominee’s details will appear on public records while the beneficial owner’s identity remains confidential.
• Anti-Money Laundering Regulations: Armenia’s Anti-Money Laundering (AML) laws require that the beneficial ownership of companies be disclosed to regulatory authorities to prevent illicit activities. Hence, while nominee arrangements can be used for privacy, they do not exempt companies from disclosing the true ownership when required.
• Corporate Governance: The nominee director must comply with the fiduciary duties outlined in Armenian company law, including acting in the best interests of the company. They can be held liable for corporate misconduct if they fail to meet these responsibilities.

BENEFITS OF USING NOMINEE DIRECTORS AND SHAREHOLDERS IN ARMENIA

Employing nominees in Armenia can provide several benefits for Foreign Investors:

• Confidentiality and Privacy: Using a nominee arrangement helps maintain the beneficial owner’s privacy in public records, which can be beneficial for investors who prefer not to disclose their identities.
• Simplifying Corporate Setup: Nominee services can help streamline the process of company formation, especially for foreign investors unfamiliar with Armenian regulations.
• Efficient Management: Nominees can handle day-to-day administrative tasks, allowing beneficial owners to focus on strategic business operations.
• Compliance Assurance: Professional nominee service providers ensure that the company meets Armenian corporate governance standards and legal requirements.

CONSIDERATIONS FOR FOREIGN INVESTORS

Foreign investors considering nominee services in Armenia should keep the following in mind:

• Partner with service providers who are knowledgeable about Armenian corporate law to ensure adherence to legal standards and reduce potential risks.
• Create detailed contracts that clearly define the roles, obligations, and limitations of nominees to prevent any future conflicts.
• Understand the circumstances in which revealing the beneficial owner’s identity is legally required to stay compliant and avoid any legal complications.

CONCLUSION

Nominee Directors and Shareholders play a significant role in helping foreign investors navigate the Armenian business landscape while maintaining a degree of privacy. While the legal framework allows for such arrangements, they come with responsibilities and risks that must be carefully managed. By understanding the roles, benefits, and limitations of nominees, investors can make informed decisions about incorporating nominee services into their corporate strategy in Armenia.