Many small businesses are started by people who have current experience working in the industry where they set up their new business. They may choose to remain in their job while they see how successful their business becomes. However, this could be an awkward situation as it could result in their business becoming direct competition for the company for which they are working.
One way to avoid an employer finding out about a competing business set up by a member of staff, is for the new business owner to use the services of a nominee director. This is a reasonably priced solution, usually costing anything from £450 to £1300 for one year, and there maybe the option to end the service early if required. Therefore, if the owner of the new business decides they want to run the business full time, they can simply appoint themselves as director and the nominee will resign their position. Here you can find a company providing nominee services.
A deed of indemnity will need to be signed. This is a legal document that states that the nominee service purchaser is the person that makes all the decisions in the business and that the nominee is director in name only. This will usually be witnessed in front of a noted professional such as a judge, solicitor or accountant. The deed of indemnity will be retained by the nominee director, and they may keep it for several years after they have ceased being a director, so they are able to prove if needed that they were not actively involved in the running of the company.
A power of attorney is also granted to the purchaser by the nominee director. This allows the purchaser to make all the decisions on behalf of the business and means that the nominee is not involved in the running of the business in any way. Once the purchaser takes full control of the business this document is no longer needed.
Please note: The information in this article is intended for informational purposes only and not as a substitute for legal advice.