So, imagine you had a company and you were ofcourse the director of the company. But what happens to all the legal and regulatory compulsions when you are not there. For example; You are sick, or a parental leave. That’s where you require something called as alternative director. I shall explain this in the context of its applicability as per companies act in India too.
Alternative Director- As per Companies Act
As per section 161(2) of the companies act, a company’s board of directors may appoint a person who at the moment doesn’t hold any other directorships in any other company. Who can be appointed as an alternative director for a period of not less than 3 months time. This can be done, when the original director is absent.
Conditions & Eligibility
Let me take you through some important rules, which companies have to comply to appoint an alternative director
- Another important legal requirement is that, an alternative director can only be appointed if the articles of association allows it.
- When the original director comes back, then this director has to resign.
- He must qualify as per the requirements of independent director.
- Also, they should not be a director in any other company
- All directors are required to register their DSC( Digital signature) and DIN(Director Identification Number)
Procedure to appoint
There are certain rules and regulations which has to be followed to make sure that the alternative director appointment is valid.
- Firstly check in the articles of association to if there are provisions to appoint.
- Secondly a written consent and decleration has to be obtained from the proposed director. This is also done using the DIR-2 & DIR 8 Form
- After that the alternative director has to provide a disclosure of interest using the MBP-1 Form
- Then get DIN & DSC
- The nomination & remuneration committee has to make a proposal for the nomination of the director
- Then issue a notice for board meeting 7 days pior and pass the resolution.
- Finally within 30 days of the board meeting, a return of appointment of directorship has to be submitted with the registrar.
Roles & Responsibilities of Alternative Director
So, when the main director is unvailble and the business wants to keep the continuity of its work. That is when you need the director. Which also means that, the alternative director has the same responsibilities as the main director. However the only difference is that its temporary.
- Vote on important decisions
- Take accountability of the decisions
- Raise important business issues in the interest of shareholders
- Act on any matters on behalf of the main director.
Frequently Asked Questions( FAQ)
Are additional director and alternative director the same?
There is very fine difference between the both. Alt director is when the original director is not available and someone steps in for them temporarily. While additional director are back up directors, then can be appointed when there is some urgent vacancy or shortfall
Can an alternative Director sign the audited financial statements?
Yes, provided you are appointed as an alternative director during the time when the auditing is completed.
Do alternative director retire by rotation?
No, then don’t because an alternative director is appointed for a limited period of time.