Process for appointment of an Alternate Director – A complete guide
January 28, 2023
What is an Alternated director of a company? And Process for appointment of an Alternate Director
Table of Content
An alternate director is a person appointed by the Board of Directors to fill in for a director who is unable to travel to India for a period of at least three months. This article examines the role and procedure for appointing an alternate director in a business. Here in this article, we are going to focus on “What is an Alternate Director of a Company?”, the Documents required for the appointment of an Alternate Director, and the Process for the appointment of an Alternate Director.
What is an Alternate Director of a Company?
An Alternate Director functions similarly to a Substitute for the Director. An Alternate Director can be appointed for a specific time period. The appointment of an alternate director is made in accordance with the provisions of Section 162 of the Companies Act 2013. The Alternate Director will act as a Director of a Company and make all important decisions as needed. The liability incurred by the Director will be transferred to the Alternate Director in full. The Alternate Director should work diligently and in the best interests of the Company.
Prerequisites for appointment of a director of a company
- Only if the Articles of Association (AOA) allow it or if the Company passes a resolution at a General Meeting then the Board of Directors appoint Alternate Directors.
- When the Original Director returns or the term of the Original Director expires, the Alternate Director must resign.
- Individuals recommended to serve as Alternate Directors for independent directors must be qualified to serve as independent directors themselves.
- Any of the disqualifications listed in Sections 164 and 165 of the Companies Act, 2013 should not apply to the person being considered for the position of Alternate Director.
- The suggested individual should not serve as an Alternate Director for any of the Company’s Original Directors.
- Also required are a Directors Identification Number (DIN) and a Digital Signature Certificate.
Important Note: According to the Companies Act, 2013, the number of directors in a company cannot exceed 15. This is also relevant to the appointment of alternate directors because the company cannot appoint an alternate director if it already has the maximum number of directors.
Process for appointment of Alternate Director
There are two ways to appoint an alternate director:
- By passing a resolution in the board meeting, or
- Through passing a circular in a board meeting.
By passing a resolution in the Board Meeting
- A minimum of seven days’ notice to all Directors prior to the Board Meeting. The agenda for the meeting should also be included in the meeting notice.
- In the Meeting, a Board Resolution for the Appointment of an Alternate Director will be passed.
- Then, the Company Secretary or any Director need to sign the necessary documents for submission to the Registrar of Companies (RoC).
Through passing a circular in 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 the Company’s Director shall decide whether Board approval can be obtained by Resolution by Circular.
- The drafted Resolution, along with all necessary documents, will be sent the same day via Speed Post/E-mail/By Hand/Registered Post/Courier or any other recognised means to all Directors’ registered postal addresses.
- The Resolution should explain all of the proposal’s details, including the material facts that explain the meaning, scope, and implications of the proposal, as well as its nature.
- The Resolution should be responded to by the Board of Directors within seven days.
- If at least one-third of the Directors want to vote on the Resolution under consideration in a Board Meeting, the Chairman should hold the Resolution under consideration in a Board Meeting.
- When the majority of the Directors are entitled to vote to approve the Resolution, it is deemed to be passed.
- The proposed Alternate Director must sign a Declaration declaring his interest in other Entities.
- The new Alternate Director’s information should be submitted to the Registrar of Companies (RoC) using the DIR-12 Form.
- Following the filing of the Form, update the Register of Directors with the information of the newly appointed Alternate Director.
- Following his/her appointment as Alternate Director, he/she must notify the other companies in which he/she is a Director by filing Form MBP-1.
- Prepare and distribute the draught minutes of the Board Meeting to all Directors within 15 days of the meeting’s conclusion.
- Inform all relevant government officials of the appointment of an alternate director.
Documents required for appointing an Alternate director
- The proposed Alternate Director’s Director Identification Number (DIN).
- Identification of the Proposed Alternate Director.
- Proof of the Proposed Director’s Residence.
- Proposed Director’s Permanent Account Number (PAN) Card.
- Form of Consent signed by the Proposed Director.
- Appointment Letter.
- A true and certified copy of the Board Resolution passed.
In the Company, an Alternate Director is appointed to replace the Original Director. The Alternate Director’s appointment is for a set period of time. The procedure for appointing an alternate director is time-consuming.
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