Appointment of Alternate Director under Companies Act,2013

APPOINTMENT OF ALTERNATE DIRECTOR

Who is an Alternate Director?

Alternate director is a personnel who is appointed by the Board of Directors, as a substitute to a director who may be absent from India, for a period which isn’t less than three months. In this article, we look at the role and procedure for appointment of alternate director in a company.

According to section 161(2) of the Companies Act, a company’s Board of Directors may appoint a person who is not a person holding any alternate directorship for any other director in the company or holding directorship in the same company to act as an alternate director for a director during his absence from India for a period of not less than 3 months.

Prerequisites to appoint an alternate director

The Board of Directors can only appoint Alternate Directors if the Articles of Association (AOA) allow it or if the Company passes a resolution at a General Meeting.
When the Original Director returns or when the Original Director’s term ends, the Alternate Director must resign the position.
The individual recommended to serve as an Alternate Director for an independent director must be qualified to serve as an independent director.
Any of the disqualifications listed in Sections 164 and 165 of the Companies Act, 2013 should not apply to the person sought to be the Alternate Director.
The individual suggested should not be an Alternate Director of any of the Company’s Original Directors.
A Directors Identification Number (DIN) and a Digital Signature Certificate are also required (DSC).

Power to Appoint Alternate Directors

An alternate director can be appointed by the Board of Directors, through authorization by way of a clause in Articles of Association or by passing a resolution in the general meeting.

Notices and Meeting

Appointment of alternate directors wouldn’t keep the original directors sidelined. The original director as well as the alternate director, is entitled to receive notices of board meetings, and may participate in it. This is especially relevant when a meeting takes place in a location where the original director is stationed. It may be noted that both the original and alternate director cannot attend the same meeting. The alternate director is specifically appointed to fill the temporary void of the original director. For example, if an original director is supposedly stationed at Brussels, and the meeting is being held at Brussels, the alternate director wouldn’t be a part of the meeting due to the availability of the original director.

Procedure to appoint alternate director

i. Check the Article of Association of the Company

Refer to the AOA; if the AOA has not authorised the appointment of the Alternate Director, it must be altered.

ii. Obtain Written Consent and Declaration from the Proposed Alternate Director

Form DIR-2 (Consent to Act as a Director) and Form DIR-8 (Intimation by Director about his Disqualification) must be submitted to the Company by the proposed Alternate Director. In addition, such a person must make a declaration that he meets the requirements for appointment as a Director.

iii. Obtain Form MBP-1 from the Proposed Alternate Director

The individual nominated to be appointed as an Alternate Director must provide a disclosure of interest in Form MBP-1 to the company.

iv. Obtaining DIN and Digital Signature Certificate [Section 153]

1. If the individual does not have a digital signature, he must get one from an Indian Certifying Authority.

2. The individual must possess a valid DIN issued by the Ministry of Corporate Affairs. Currently, only the company where he or she is planned to be appointed can submit an application for a DIN to MCA.

3. The application for DIN must be countersigned by a director of the company, and the person must also submit a copy of the resolution approving the proposal of appointment in Form DIR-3 with MCA, along with his ID proof and address proof, duly digitally signed by him and a director of the company in which the appointee is intended to be appointed as director.

4. Documents for DIR-3 are as follows:

One Passport Size Photo in JPG/JPEG Format
Board Resolution proposing his appointment as director in an existing company
Specimen signature duly verified
ID Proof- Driving License/Passport/Election Voter ID Card
Residence Proof- Utility Bill (Electricity Bill/Telephone Bill)/Bank Statement/Mobile Bill
Other Mandatory Attachments- Income Tax PAN (For Indian National), Passport (For Foreign Nationals)
Other Attachments- Aadhaar Card.

v. Meeting of Nomination and Remuneration Committee

When a company is required to form a Nomination and Remuneration Committee under section 178, the committee must make a proposal to the Board of Directors for the appointment of an Alternate Director.

Issue a notice for Board Meeting at least seven days prior to the meeting. Convene a Board Meeting. Hold a meeting of Board of Directors of the Company and pass the following Resolutions:

to appoint an Alternate Director
to take note of the disclosure of Interest received from the Alternate Director
to authorize Company Secretary or any Director to sign and file the relevant form with Registrar of Companies and to do such acts, deeds and things as may be necessary to give effect to the Board’s decision.

Within 24 hours of the end of the Board Meeting, the Listed Company must notify the Stock Exchanges of the appointment and post it on the Company’s website within two working days. [Regulation 30 & 46(3) of the SEBI (LODR) Regulations, 2015]

Prepare and distribute Draft Minutes to all Directors for comment within 15 days after the Board Meeting’s end, via hand/speed post/registered post/courier/e-mail.

Filing of Return of Appointment of Director with the ROC

Within 30 days following the Board meeting, a Return of Appointment of Directorship (Form DIR-12) must be submitted with the Registrar, together with a copy of the Board Resolution, Consent, and Declaration. A Company Secretary/Chartered Accountant/Cost Accountant must also certify the return in the case of companies other than OPC and Small Companies. As an attachment to Form DIR-12, the following documents will be provided:

Certified True Copy of the Board Resolution passed.
DIR-2 Consent to Act as Director
DIR-8 Declaration by Director
Letter of Appointment.

Tenure of an Alternate Director

The alternate director’s tenure comes to an end as soon as the original director is back in the country i.e. after a minimum period of three months. Besides that, an alternate director cannot maintain his position in the event of the sudden resignation of the original director.