Additional, Alternate and Casual Vacancy Director (Part-2)
Introduction:In previous part we have discussed what are the provisions relating to additional director and alternate director. In this part we will discuss the practical illustrations relating to additional, alternate and casual vacancy director along with remaining provisions.
Whether re-appointment of original director will be treated as re-appointment of alternate director?
It has been stated that every company shall have 2/3th of its directors as rotational directors and out of such 1/3th of such director shall be retiring directors. It may happen that person in whose place the alternate director is appointed is liable to be retired by rotation. The question arises that whether re-appointment of original director will automatically be treated as re-appointment of alternate director. It has been stated that provision relating to automatic re-appointment will be applicable to original director and not to alternate director. In case if original director is automatically re-appointed than in such case it will not validate the automatic re-appointment of alternate director. The process relating to automatic appointment is required to be followed again board of directors.
Now, as stated earlier 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 person will be eligible to appoint alternate director in his place. If after above automatic re-appointment, whether the period of 3 months will include the period before of his re-appointment; It is well established position of law that if after re-appointment person is not is out of India for minimum three months than and only than board of director can appoint alternate director in place of absent director.
Causal Vacancy Director:
If position of any director is who is appointed in general meeting is vacated before his term of office expires than vacancy caused due to such, will be treated as casual vacancy.
How Causal vacancy director is to be appointed?
Casual vacancy director is appointed by passing resolution of Board of directors; such appointment is to be re-validated by shareholders in general meeting by passing ordinary resolution.
Whether Casual vacancy director is to be considered under the provision of rotation of director?
Yes, provision of rotation of directors is applicable to such directors.
Whether any person appointed under causal vacancy 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 been appointed as casual vacancy director, will be considered for calculating limit of maximum directorship.
Whether provision of disqualification as prescribed under Section 164 will be applicable to casual vacancy 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 casual vacancy director.
What will be tenure of casual vacancy director?
The tenure of person who is appointed by virtue of provisions relating to casual vacancy director; can hold office up tothe date up to which the director in whose place he is appointed would have held office if it had not been vacated.
1. ABC and Company has 11 directors in its board, it wants to appoint Mr. G as additional director. Whether they can appoint additional director? If yes what will be tenure of additional director if last date up to which AGM is to be held in 30th Sep, 2021 and actual date of AGM is 7th October, 2021?
If article of association authorizes that Board of Directors of Company than, resolution by board of directors is sufficient to appoint any person as additional director. Further as prescribed the tenure of additional director for holding of office is 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. In above case the additional director can hold office up to 30th September, 2021.
What if Mr. G was rejected from appointed in general meeting?
In said case Mr. G cannot be appointed as additional director.
Whether vacancy caused in place of Mr. G will be treated as casual vacancy?
It has been prescribed that if any director is who is appointed in general meeting has vacated before his term of office expires than vacancy caused due to such, will be treated as casual vacancy. It shall be noted that additional director is not appointed in general meeting of company and therefore vacancy caused due to completion of tenure of Mr. G will not be considered as casual vacancy.
Whether Mr. G can be appointed as director after his completion of term as additional director?
There is no restriction on appointment of Mr. G as regular director after his completion of term as additional director.
Mr. G is holding the position in 20 companies as director, he is of the opinion that such acceptance will not be considered for calculating limit of Maximum Directorship?
It has been determined that position by person as additional director will be considered for calculating limit of Maximum Directorship. Mr. G shall not accept such appointment, otherwise such acceptance will be treated as violation of section 165 of Companies Act, 2013.
Mr. Hari is going out of India for 7 Months; he has intimated about his such tour to company. Company is willing to appoint an alternate director in absence of Mr. Hari? Whether company can do so? What if Mr. Hari wants to appoint alternate director in his absence by his own?
In shall be noted that as per section 161(2) it allows the company to appoint alternate director if original director in whose place alternate director is appointed is outside India for minimum period of 3 continuous months. But the power to appoint alternate director lies with Board of directors of company and not with the person who is going to be absent. Therefore, in above case company can appoint alternate director in absence of Mr. Hari. The appointment shall be carried out by Board of directors of Company.
What if in above case Mr. J has been appointed alternate director of Mr. Hari; What if he is also alternate director of Mr. Shiva who is also director in said company?
In such case it will be treated as violation of 161(2) of Companies Act, 2013; As it has been determined that person can be alternate director of behalf of two directors in same company.
What if he Mr. J is alternate director of Mr. Shiva in other company and not in the company in which he is alternate director on behalf of Mr. Hari?
In case it will not be treated as violation; as Mr. Jis barred from been alternate director of two directors in same company, here he isalternate director of Mr. Shiva in other company and not in the company where he is acting as alternate director on behalf of Mr. Hari.
What if Mr. J is already director in same company?
In such case Mr. J will be barred from been appointed alternate director.
What if Mr. Hari tenure is completed in 5 Months and he is automatically been re-appointed; Whether such re-appointed will led to automatic re-appointment of Mr. J?
In such case it has been prescribed that automatic re-appointment of original director in whose place alternate director is appointed will not be treated as automatic re-appointment of alternate director. Mr. J will vacant the office after the said 5 Months. Further now a fresh period of continuous 3 Months outside India will be required to appoint alternate director by board of directors in case of absence of Mr. Hari. as total period of his absence is 7 months and 5 months has already been completed before his re-appointed, therefore, company will not be able to appoint alternate director for remaining period of 2 months in absence of Mr. Hari.
Mr. Narayan was appointed as director, due to unforeseen circumstances Mr. Narayan couldn’t complete his term and company appointed Mr. Ravi as director after such casual vacancy. Whether such appointment is required to be re-validated by shareholders of the company?
As per the amendment prescribed under section 161(4) if any person is appointed under the name of casual vacancy; his appointed is required to be re-validated by shareholders by passing ordinary resolution in immediate general meeting. In above case appointment of Mr. Ravi is required to be re-validated by shareholders of the company in immediate general meeting.