Additional, Alternate and Casual Vacancy Director (Part-1)
Introduction:It may happen that after incorporation of company, due to additional work there is requirement to appoint a person as additional director. There may also be situation where director is not able to complete his term and company is required to fill such casual vacancy caused. Importantly, it shall also be known that what is the difference between casual vacancy director and alternate director. In this article we will cover all the provisions relating to additional director, casual vacancy director and alternate director.
Additional Director:
How additional director can be appointed?
There is no specific procedure to appoint any person as additional director; but Article of Association of Company shall allow Board of Directors to appoint additional director.
Which resolution is required to appoint additional director?
There is no requirement of shareholders resolution, resolution by board of directors is sufficient to appoint any person as additional director.
Whether there is requirement to conduct board meeting for appointing additional director?
As such there is no requirement to conduct board meeting; only thing that is required is that board of directors passes a resolution for appointment of additional director.
Is there any provision that additional director can only be appointed at year end?
No, board of directors can appoint additional director at any time.
What if article of association is not permitting to appoint additional director?
In such case, Board of directors of company will be required to amend Article of Association and for the said purpose Special Resolution of Shareholders will be required.
Whether any person is restricted from being appointed as additional director?
Any person, who fails to get appointed as a director in a general meeting, cannot be appointed as an additional director.
What will be the tenure of additional director?
Additional director will hold office up to the date of the annual general meeting or the last date on which the annual general meeting should have been held, whichever is earlier; i.e., if Annual General meeting is not held in time given under Section 96 of Companies Act, 2013 than in that case Additional director shall vacant the office on date, which was last date to conduct AGM.
Whether additional director is to be considered under the provision of rotation of director?
As it has been stated that the said person has to vacant the office on date on which AGM is held or the last date on which the annual general meeting should have been held; therefore, no question arises for his consideration under the provision of rotation of director. Additional director will not be considered for the calculation of rotational directors.
Alternate Director:
What is the key point relating to alternate director that differentiate it from causal vacancy director?
If any person is out of India for minimum three months but less than twelve months after giving intimation to company about his absence than the Board of Directors will be eligible to appoint alternate director in place of such absent director. It shall be noted that if absence is of less than three months; than in that case Board of directors will not be allowed to appoint any person as alternate director in place of such absent director; and in case if person is not present for more than twelve months with or without intimation, than it will be treated as causal vacancy.
How alternate director can be appointed?
The article of company shall empower board of directors to appoint alternate director if article of association is not giving such power to board of directors of company than in that case; an ordinary resolution will be required from shareholder of company in general meeting. It shall be noted that power to appoint alternate director lies with Board of Directors of the company not with person who is going to be absent.
How can be alternate director?
Any person is proposed to be appointed as alternate director shall not be the person who is director of the said company. Further such person shall not be the alternate director of any other director of said company.
Whether person can be appointed in case of absence of Independent Director?
Yes, person can be appointed in case of absence of Independent Director. In such case person who is proposed to be appointed as alternate director shall be qualified to be appointed as alternate director.
What if article of association is not permitting to appoint alternate director?
In such case, Board of directors of company will be required to amend Article of Association and the for the said purpose Special Resolution of Shareholders will be required.
What will be the tenure of alternate director?
As per the provisions the alternate director it shall not hold office for a period longer than that is permissible to the original director in whose place he has been appointed. Also, if original director comes before completion of his tenure in company than alternate director shall vacate the office.
Whether additional director is to be considered under the provision of rotation of director?
The provision of rotation of directors is applicable to original director in whose place alternate director is appointed; however, it is not applicable to alternate directors.
Whether the holding of alternate directorship will be considered for calculation limit of maximum directorship.
As per section 165 of Companies Act, 2013; it has been determined that person can hold directorship up to the extent of specified limit and holding alternate directorship will be considered for calculating limit of maximum directorship.
Whether provision of disqualification as prescribed under Section 164 will be applicable to alternate director?
As per the provision of section 164 person will be disqualified to be appointed as director if he has attracted a disqualification specified therein; It shall be noted that such provision will be applicable to alternate director.
Whether alternate director is exempted from furnishing DIR-2?
Any person who is holding himself to be appointed as alternate director, then he must furnish his consent in DIR-2 to the company on or before his appointmentand inturn the company shall file his consent with the Registrar in DIR-12.
In part-2 we will discuss the practical illustrations relating to additional director, alternate director and alternate director and remaining provisions relating to alternate director and causal vacancy director.