Do I Need a Local Director to Open a Subsidiary in Another Country?
“The incorporation agent says we need a local director. Who do you even put on the board?”
You’re expanding abroad. Customers are waiting, a first hire is lined up, and your subsidiary paperwork just stalled on one question.
In some countries, you cannot register the company without a resident director. In others, you can. Pick the wrong person, or the wrong structure, and you’ve handed legal authority over your subsidiary to someone you barely know.
Some Countries Require One, Many Do Not
Resident director rules vary widely. A few examples:
- Singapore: every company must have at least one director who is ordinarily resident in Singapore, at all times.
- Canada (federal): at least 25% of directors must be resident Canadians, or one director if the board has fewer than four.
- Ontario and several other provinces: dropped their resident director rule, so incorporating provincially can avoid it.
Where and how you incorporate can change the answer.
A Local Director Is a Real Director
A resident director is not a mailbox. They carry the same legal duties as every other director. Singapore’s regulator has warned that anyone accepting a director role, including a nominee, must be able to properly carry out those duties, and 2025 reforms raised penalties for breaching them. That person can sign documents and bind your subsidiary.
Nominee Directors Come With Rules
Many founders hire a nominee, a professional who serves as the local director for a fee. That can work, but it is regulated. In Singapore, nominee arrangements now must go through registered corporate service providers, and nominee status is publicly visible.
Directors Answer for Local Compliance
Your subsidiary will handle local payroll, taxes, and customer data. The local director shares responsibility for all of it, including local privacy laws on where personal data is stored and transferred.
Common Founder Mistakes
- Picking Whoever Is Available: Founders appoint a local employee, a distributor, or a friend just to get registered. That person now holds real legal authority. If the relationship sours, removing them can be slow and messy.
- Skipping the Paperwork Behind the Director: A nominee or local director needs clear written limits. Make sure you have:
- a services agreement defining their role and fees
- limits on what they can sign without parent approval
- a clean exit process and resignation terms
Without these, your control over the subsidiary depends on goodwill.
- Ignoring Tax Residency: A resident director does not automatically make the subsidiary tax resident there. Tax authorities look at where real decisions happen. A passive director plus decisions made in the US can create a mismatch that surprises you at tax time.
10-Minute Self-Check
Before you register a foreign subsidiary, you work through this list:
- Do you know whether your target country requires a resident director?
- Have you compared incorporation options that might avoid the requirement?
- Do you trust the person you are appointing with real legal authority?
- Is there a written agreement limiting what the local director can sign?
- Do you know how to remove and replace the director quickly?
- Do you know what customer data the subsidiary will collect and transfer?
If you cannot answer yes to all of these, you are not ready to register that subsidiary yet.
Bottom Line
A local director requirement is a paperwork question with control consequences. The right person, with the right written limits, keeps your expansion moving. The wrong one can quietly hold the keys to your foreign business.
Do I Know Where My Customer Data Will Flow Once My Subsidiary Opens?
Download our free Data Mapping Worksheet to identify where personal information is collected, stored, and transferred throughout your business. Mapping your data before updating your privacy documentation helps ensure your policies accurately reflect how your product actually works.
Get the free worksheet: https://primumlaw.com/data-mapping-worksheet/?post_type=page