The requirement usually appears as a short line in a rulebook: the firm must have adequate presence, or a director resident in the jurisdiction, or its head office in the same place as its registered office. The line is short, the consequences are not. It determines who has to move, how much the operation costs every month, and whether a bank will open an account for the entity at all.
What resident actually means
Residence is not a checkbox. Depending on the regime it can mean a person who is tax resident locally, who holds a local residence permit, who spends a defined portion of the year in the country, or all three. A director who flies in for board meetings and lives elsewhere satisfies almost none of these definitions, though the paperwork can be made to look as though it does for a while.
Some jurisdictions go further and require the resident director to hold an executive function rather than a seat. That distinction matters more than founders expect. A resident non executive director provides oversight. A resident executive with the compliance or dealing function has to be qualified for it, which brings the appointment straight back into the fit and proper assessment. Recruiting for that locally is often the slowest part of a launch, and it should start before the application is filed rather than after the regulator asks.
The office, and what counts as one
Office requirements are graded. At the light end, a registered address for service of documents. In the middle, dedicated premises under the firm's own lease with a workspace per employee. At the heavy end, premises the supervisor may inspect without notice, with records held on site, controlled access, and separation between dealing and back office functions.
Shared and serviced offices are accepted in some regimes and rejected in others, and where they are accepted the test is usually whether the space is exclusively the firm's, whether client records can be secured, and whether it is genuinely used. An office nobody sits in is a lease, not a presence. Supervisors have visited and found empty rooms, and that finding travels: the same fact appears in the next licence application, and it appears in bank due diligence.
Requirements vary enormously between regimes and change. Free zone and onshore rules inside the same country can differ. Confirm current conditions with local counsel and the regulator's published rulebook before signing any lease or employment contract.
Mind and management
Behind the specific rules sits a broader concept several supervisors and tax authorities apply: where the firm is directed and controlled. It is assessed on evidence rather than declarations. Where do board meetings physically happen, who attends, and are minutes signed there. Who approves risk limits and payments. Where do the people who make those decisions live. Whose email account originates the instructions.
Groups that fail this test usually fail it in a specific way. The licensed entity has a local board on paper, and the operating decisions come from a marketing or technology company in another country whose founders own everything. Nothing about a multi entity structure is improper in itself, and splitting technology from regulated activity is normal practice, described in group and holding company structures. What breaks is when the regulated entity is a shell that executes decisions made elsewhere while presenting itself as autonomous. Economic substance legislation in several offshore centres now tests exactly this, with core income generating activities required to happen locally. The general position is covered in offshore substance requirements.
Why banks care as much as regulators
The commercial half of this is often decisive. When a bank onboards a licensed trading firm it runs know your business checks that look for a coherent story: an entity licensed in country A, with directors resident in country A, staff on a local payroll, an office it can verify, and clients consistent with the stated market. When the directors are resident in three other countries and the only local presence is a corporate services provider, the file gets rated as higher risk, and higher risk files get declined or priced accordingly. Correspondent banking pressure has made banks less willing to carry that risk at all, a mechanism explained in correspondent banking de risking.
Payment providers and card acquirers apply similar logic during underwriting, and jurisdiction risk ratings sit inside their models alongside chargeback expectations. A structure that technically satisfies a light touch regulator but reads as a shell to an underwriter can leave a firm licensed and unable to take deposits. That is a worse outcome than a slower application in a jurisdiction with real requirements, which is why the substance question belongs in the jurisdiction decision rather than after it. Cities where teams commonly establish real operations, including Dubai, are worth costing out properly before the cheaper paper option looks attractive.
This article describes mechanisms and is not legal or tax advice. Residence, substance and permanent establishment interact with tax rules that differ by country and by individual circumstances, and both corporate and personal advice is needed before committing.
"If the person who signs the risk decisions has never been to the country on the licence, the structure is going to be tested, by the regulator or by the bank."
— Roman Onta, Executive Director, SINGUARD
Key Takeaways
- Resident director conditions can mean tax residence, a permit or a minimum presence, and a fly in board seat rarely satisfies them
- Office requirements range from a service address to inspectable premises with records held locally, so read the actual rulebook condition
- Mind and management is assessed on evidence, and a licensed entity that only executes decisions taken abroad will be tested
- Banks and payment underwriters rate substance independently, so a shell structure can leave a licensed firm unable to accept deposits
Frequently Asked Questions
Is a serviced or shared office enough to meet a local presence condition?
Sometimes, and only where the rulebook allows it. Where it is allowed, supervisors generally look for exclusive use of the space, secure storage of client records and evidence that staff actually work there. An unused office is treated as an address rather than a presence.
Can a group appoint a local resident director who is not involved day to day?
A non executive resident seat may satisfy a residence condition in some regimes, but it does not satisfy mind and management if all real decisions are taken elsewhere. Where the role carries an executive function, the person also has to be competent for that function.
Do substance rules apply to offshore jurisdictions as well?
Many offshore centres have introduced economic substance legislation requiring core income generating activity, adequate staff and expenditure to occur locally for relevant activities. The detail varies, so check the current local law rather than assuming a jurisdiction is light touch.
About the Author
Roman Onta is an Executive Director at SINGUARD. He builds the Prop Firm CRM, the Broker CRM, Scalegram and CopySignals side by side with his brother Alex Onta, and he helped on the design of eTrader, the division Alex built and leads. His ground is worldwide payment processing, AML compliance and the corporate structures brokers are built on, work the two of them carry together, shaped by executive roles in the UAE and international corporates. He lives and works in Dubai for most of the year. Meet the executive duo leading Singuard's five divisions.