What is an Alternate Director?
An alternate director is a person appointed by the company’s board to temporarily fill the role of a director when a regular director is unable to perform their duties. According to the Companies Act, an alternate director should attend board meetings, participate in decision-making, and ensure compliance with policies, on behalf of the absent director.
Some of the scenarios where an alternate director is needed are unexpected absences of a regular director, conflict of interest, or bringing in additional expertise for specific issues.
What is the role of an alternate director?
Alternate directors are expected to assume the roles and responsibilities of principal directors, which include:
- Executing the same duties as regular directors, such as meeting attendance, serving on committees, and reviewing board papers.
- Voting on resolutions and participating in decisions
- Partaking in board reports and staying updated with board activities and trends
- Engaging with other board members and stakeholders
- Ensuring compliance with company policies and governance standards
- Maintaining confidentiality and integrity of the company’s information
- Ensuring liability over their actions and decisions
- Reporting back to the absent director of key decisions and activities
The scope of the function and authority of an alternate director is similar to the director they represent. They are given these rights and responsibilities for a predefined and limited period.
Alternate director vs Proxy director
Stepping into the shoes of a regular director, alternate directors are often confused with proxy directors. However, they are different in various aspects such as roles and authority.
While alternate directors have the same powers, duties, and legal responsibilities as the original director, the proxy only has the right to vote based on the director’s or shareholder’s instructions at annual general meetings. They do not have decision-making power beyond casting that vote and cannot act independently.
In terms of power and authority, alternate directors hold full decision-making authority in the director’s absence. Whereas, the proxy is only limited to casting a vote. Their authority does not extend to participating in discussions or making independent decisions.
Appointment of Alternate Director
The appointment of an alternate director follows a formal process and is usually recorded in writing. Here’s the step-by-step process.
- Nomination – A regular director identifies a suitable individual to act as their alternate.
- Review of Eligibility and Board Approval – Upon nomination, the board reviews the individual to meet specific criteria, including (a) being over 18 years of age, (b) not being disqualified from serving as a director under corporate laws, and (c) possessing relevant expertise. Approval of the appointment is done through a formal board resolution.
- Consent from the Alternate Director – Before the appointment is finalized, the nominated alternate director must give their written consent. This ensures that they fully understand the responsibilities and legal obligations of the role.
- Notification and Documentation – After the board’s approval and the alternate director’s consent, the company is required to update the internal records and notify relevant authorities, such as corporate registrars and regulators.
Termination of Appointment – The alternate director can be terminated under several conditions, including the resume of the regular director, the board revoking the appointment, and if the alternate director resigns or is terminated due to misconduct.