Certainly, there will be times in Private Companies when there will be no Directors present or miss the Board Meetings due to illness, taking leave or frequent travel. The Company’s operation cannot stop at these times when there is no Director present in the Company. So to resolve this The Companies Act, 2013 provides for the Appointment of Alternate Director to fill in for a particular Director when in need. In this article, we will discuss the procedure followed for the Appointment of Alternate Director.
What is an Alternate Director?
An Alternate Director is like a Substitute for the Director. An Alternate Director can be appointed for a set period of time. The Appointment of Alternate Director is made according to the rules prescribed in Section 162 of the Companies Act 2013. The Alternate Director will be working as a Director of a Company and will be taking all important decisions as required. The liability incurred by the Director will fully apply to the Alternate Director. The Alternate Director should act in the best interest of the Company and work with due diligence.
What are the Key Considerations Followed for the Appointment of Alternate Director?
Section 161(2) of The Companies Act, 2013 explain the Appointment of Alternate Director in the Company. The considerations for Appointment are as follows:
- Board of Directors can only appoint Alternate Director if there is a resolution passed by the Company in a general meeting or authorized in Articles of Association (AoA) to the Board.
- If authorized by AoA or in a General Meeting, the Board can appoint a person as an Alternate Director other than any other Alternate Director appointed for any other Director.
- Board of Directors can appoint an Alternate Director for not less than 3 months.
- The Alternate Director has to vacate the office when the Original Director returns.
- When the tenure of the Original Director expires, the Alternate Director has to vacate the office.
- The person proposed to be Alternate Director should be qualified to be appointed as an Independent Director.
What is the Procedure for Appointment of Alternate Director?
Ensure that the Articles of Association (AoA) permits for the Appointment of Alternate Director. Additionally, check whether the AoA authorizes the Board to pass a Resolution in a General Meeting for Appointment of Alternate Director.
If the AoA does not allow for the Appointment of Alternate Director, either
- Alter the AoA, or
- Pass a resolution in the General Meeting for the Appointment.
The Appointment of Alternate Director can be made in two ways:
By a Resolution in Board Meeting
- A notice of not less than seven days to all the Directors before the Board Meeting. The notice of Meeting should also include the Agenda for which the Meeting is scheduled.
- A Board Resolution will be passed for the Appointment of Alternate Director in the Meeting held.
- Then, authorize the Company secretary or any Director sign the relevant documents for filing to the Registrar of Companies (RoC).
By a Circulation in the Board Meeting
- The Chairman of the Board or in his absence, the Managing Director or in his absence, The Wholesome Director or in his absence, and Director of the Company shall decide that whether the approval of Board can be obtained by Resolution by Circular.
- The drafted Resolution with all the necessary documents will be sent same-day through Speed Post/E-mail/By Hand/Registered Post/Courier or any recognized means to the registered postal addresses of all Directors.
- The Resolution should explain all details of the proposal, the material facts which explain the meaning, scope and implications of the proposal made and its nature.
- The Directors should respond in seven days to the Resolution.
- If the minimum of 1/3rd Directors wants to decide the Resolution under circulation in a Board Meeting, then the Chairman should hold the Resolution by Circular under consideration at a Board Meeting.
- The Resolution is deemed to be passed when the majority of the Directors entitled to vote approves for the Resolution.
- The Proposed Alternate Director should give a signed Declaration with his interest in other Entities.
- The particulars of the new Alternate Director should be filed to the Registrar of Companies (RoC) by submitting the DIR-12 Form.
- After the filing of the Form, make the necessary changes in the Register of Directors by obtaining the information of the newly appointed Alternate Director.
- After the Appointment of Alternate Director, he/she should inform the other companies in which he/she is a Director by filing the Form MBP-1 about his Appointment.
- Prepare and share the draft minutes of Board Meeting within 15 days of the conclusion of the Meeting to all the Directors.
- Inform all the concerned Government Authorities about the Appointment of Alternate Director.
What are the Requirements a person should fulfil for Appointment of Alternate Director?
- The person proposed to be the Alternate Director should not come under any of the disqualifications mentioned under Section 164 and 165 of The Companies Act, 2013.
- The person proposed should not hold any office as Alternate Director of any other Original director in the Company.
- The person should fulfil the conditions specified in Section 149(6) and Rule 5 of Companies (Appointment and Qualification of Directors) Rules, 2015.
- The person should also have a Directors Identification Number (DIN) and is not disqualified from becoming a Director under the provisions of the Companies Act, 2013.
What are the Documents Required for Appointment of Alternate Director?
- Director Identification Number (DIN) of the Proposed Alternate Director
- ID Proof of the Proposed Alternate Director
- Residence Proof of the Proposed Director
- Permanent Account Number (PAN) Card of the Proposed Director
- Consent Form signed by the Proposed Director
- Letter of Appointment
- Certified True Copy of the Board Resolution passed
An Alternate Director is appointed as a replacement of Original Director in the Company. The appointment period of the Alternate Director is limited. The procedure followed for the Appointment of Alternate Director is time-consuming. We at Corpbiz have qualified and proficient professionals to help you in the process of Appointment. Our professional will direct you and assist you in getting through the process of Appointment of Alternate Director. Our professionals will plan ideally and will make sure the successful completion of the process.