Appointment of Alternate Director

Appointment of Alternate Director: Procedures and Documents Required

Online Legal India LogoBy Online Legal India Published On 31 Oct 2022 Updated On 18 Jan 2023 Category Business

There will undoubtedly be a time in private companies when directors will be absent or board meetings will not be attended owing to illness, taking leave, or frequent travel. Operations cannot be stopped because of the absence of Directors in the company. In order to address this, the Companies Act of 2013 allows for the appointment of alternate director who can take the place of a specific director as needed. We will go over the process used to appoint an alternate director in this blog.   

According to Section 161(2) of the Companies Act 2013 (hereafter, CA, 2013), the company's Board of Directors may appoint a person as an alternate director provided the articles of association (AOA) or a resolution adopted by the Company in a general meeting permit it. As long as he is not serving as an additional director for another director of the company while away from India for a minimum of three months, that is. In addition, the provision of Section 161(2) states that no one may be appointed as an independent director’s substitute unless he meets the requirements to do so.            

What is Alternate Director?

The Director is replaced by an Alternate Director. A temporary appointment of an alternate director is possible. The 2013 Companies Act's Section 162 regulations are followed for the appointment of alternate director. The Alternate Director will perform the duties of a Director for a Company and make all necessary crucial decisions. The Alternate Director will be solely responsible for the Director's debts. He or she should exercise diligence and act in the Company's best interests.    

Important Provisions to Consider for the Appointment of Alternate Director

Only appointments of Alternate Directors by the Board of Directors are permitted by the Articles of Association (AOA) or by resolution passed by the Company at a General Meeting.

The Alternate Director has to leave the office when the Original Director comes back or when the term of the Original Director expires.  

The person who is being considered to serve as an alternate director of an independent  director should meet the requirements for such an appointment.

Any of the disqualifications listed in Sections 164 and 165 of the 2013 Companies Act should not apply to the candidate for Alternate Director.

The person being considered should not serve as an Original Director's Alternate Director in the Company.

A Digital Signature Certificate and Directors Identification Number (DIN) should also be present (DSC) with the person.

Documents Required for the Appointment of Alternate Director

  1. Passport size photograph (colour)
  2. Applicant’s Identity proof
  • Indian national: Income tax PAN.
  • Foreign national: passport is mandatory.
  1. Applicant’s address proof:  passport, voter ID, ration card, etc.
  2. Board resolution recommending his appointment as a director of an established business.
  3. Declaration in Form DIR-3A, if necessary
  4. For the return of appointment of alternate director- Form DIR-12, the following documents are needed
  • Written consent in Form DIR-2.
  • Certified copy of board resolution.
  • Details of interest in other entities, if any.

Procedures to Be Followed for the Appointment of Alternate Directors 

Step 1. Obtain written consent and declaration 

Obtain Form DIR-2, written consent from the person considered to be appointed as an alternate director of the Company. Further, obtain a declaration in Form DIR-8 from the person considered to be appointed as an alternate that he isn’t disqualified from being a director under that Act and obtain disclosure of interest in Form MBP-1 from the person to be appointed as Alternate Director of the company.          

Step 2. Obtain Form MBP-1 from the proposed Alternate Director

The company shall obtain the declaration of interest in Form MBP-1 from the person considered to be appointed as an Alternate Director.

Step 3. Obtain DIN and Digital Signature Certificate [Section 153]

  • If the person does not have a digital signature, he must receive one from an Indian certifying authority.
  • The individual must possess a current DIN issued by the Ministry of Corporate Affairs. Currently, the only way to apply to MCA for the allocation of a DIN is through the organisation where the applicant is intended to be employed.
  • A director of the company is required to countersign the Application for DIN, and the applicant must also submit a copy of the resolution approving the proposed appointment in Form DIR-3 with MCA, along with proper identification and address documentation that has been digitally signed by both the applicant and a director of the company where the applicant is proposed to be appointed as a director.
  • The documents for DIR-3 need to be submitted:
  1. A passport-size photo in JPEG or JPG format
  2. Board resolution recommending his appointment to the board of a currently operating corporation
  3. ID Proof: Driving License, Passport, Election Voter ID Card; 
  4. Residence Proof: Utility Bill (Electricity Bill, Telephone Bill), Bank Statement, or Mobile Bill;
  5. Other Mandatory Documents: For Indian National; Income Tax PAN; For Foreign Nationals- Passport 
  6. Aadhaar card.
  7. Specimen signature duly verified

Step 4. Nomination and Remuneration Committee Meeting

If a company is required to form a nomination and remuneration committee under section 178, the committee's recommendation for the appointment of alternate director by the company's board of directors must be followed.

Step 5. Call a Board Meeting

a. Issue a notice of a board meeting to all directors of the company at the address registered with the company seven days before the date of the board meeting. In the case of an emergency, shorter notice may be given. 

b. Include the Notice's Agenda, Agenda Notes, and Draft Resolution.

c. Hold a meeting of the company's board of directors to consider the agenda and adopt the necessary board resolution.

  • For the appointment of alternate director
  • To take note of the Alternate director’s interest disclosed
  • To give the company secretary or any other director the authority to sign and file the appropriate form with the Registrar of Companies, as well as to take any other actions that may be necessary to carry out the Board's decision.

d. Within 24 hours after the Board Meeting's end, listed companies must notify the Stock Exchanges of the appointment, and within two business days, the disclosure must be posted on the Company's website.

e. Within 15 days following the conclusion of the board meeting, draft minutes should be prepared and distributed to all directors for feedback via hand delivery, speed post, registered mail, courier, or email.

Step 6. File Return of Appointment of Directors 

A Return of Appointment of Alternate Director (Form DIR-12) together with a copy of the Board resolution, consent, and declaration must be submitted to the Registrar within 30 days of the appointment. A company secretary, chartered accountant, or cost accountant must additionally certify the return in the case of companies other than OPC and small companies.

The following files must be attached to the Form DIR-12 
 

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

Step 7. Make required entries in the Register of directors 

The company should make necessary entries in the registers for directors and key managerial personnel, as well as registers for contracts and agreements in which directors have an interest.   

Step 8. File required Amendment Application under the following Acts

  • Goods and Services Act
  • Shops & Establishment Act
  • Factories Act
  • Foreign Exchange Management Act
  • Inter-State Migrant workmen Act
  • Private Security Agency Act
  • EPF
  • ESI
  • Other Labour Laws
  • Industry Specific Laws

Conclusion 

The Company appoints an Alternate Director in place of the Original Director. The appointment of an Alternate Director's term is constrained. The process used to appoint an alternate director takes a long time. You can apply for the necessary registration and prepare documentation with the help of our legal experts at Online Legal India.


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