According to section 161(2) of the Companies Act, a company’s Board of Directors may appoint a person who is not a person holding any alternate directorship for any other director in the company or holding directorship in the same company to act as an alternate director for a director during his absence from India for a period of not less than 3 months.
Prerequisites to appoint alternate director
- The Board of Directors can only appoint Alternate Directors if the Articles of Association (AOA) allow it or if the Company passes a resolution at a General Meeting.
- When the Original Director returns or when the Original Director’s term ends, the Alternate Director must resign the position.
- The individual recommended to serve as an Alternate Director for an independent director must be qualified to serve as an independent director.
- Any of the disqualifications listed in Sections 164 and 165 of the Companies Act, 2013 should not apply to the person sought to be the Alternate Director.
- The individual suggested should not be an Alternate Director of any of the Company’s Original Directors.
- A Directors Identification Number (DIN) and a Digital Signature Certificate are also required (DSC).
Procedure to appoint alternate director
i. Check the Article of Association of the Company
Refer to the AOA; if the AOA has not authorised the appointment of the Alternate Director, it must be altered.
ii. Obtain Written Consent and Declaration from the Proposed Alternate Director
Form DIR-2 (Consent to Act as a Director) and Form DIR-8 (Intimation by Director about his Disqualification) must be submitted to the Company by the proposed Alternate Director. In addition, such a person must make a declaration that he meets the requirements for appointment as a Director.
iii. Obtain Form MBP-1 from the Proposed Alternate Director
The individual nominated to be appointed as an Alternate Director must provide a disclosure of interest in Form MBP-1 to the company.
iv. Obtaining DIN and Digital Signature Certificate [Section 153]
1. If the individual does not have a digital signature, he must get one from an Indian Certifying Authority.
2. The individual must possess a valid DIN issued by the Ministry of Corporate Affairs. Currently, only the company where he or she is planned to be appointed can submit an application for a DIN to MCA.
3. The application for DIN must be countersigned by a director of the company, and the person must also submit a copy of the resolution approving the proposal of appointment in Form DIR-3 with MCA, along with his ID proof and address proof, duly digitally signed by him and a director of the company in which the appointee is intended to be appointed as director.
4. Documents for DIR-3 are as follows:
-
- One Passport Size Photo in JPG/JPEG Format
- Board Resolution proposing his appointment as director in an existing company
- Specimen signature duly verified
- ID Proof- Driving License/Passport/Election Voter ID Card
- Residence Proof- Utility Bill (Electricity Bill/Telephone Bill)/Bank Statement/Mobile Bill
- Other Mandatory Attachments- Income Tax PAN (For Indian National), Passport (For Foreign Nationals)
- Other Attachments- Aadhaar Card.
v. Meeting of Nomination and Remuneration Committee
When a company is required to form a Nomination and Remuneration Committee under section 178, the committee must make a proposal to the Board of Directors for the appointment of an Alternate Director.
- Issue a notice for Board Meeting at least seven days prior to the meeting. Convene a Board Meeting. Hold a meeting of Board of Directors of the Company and pass the following Resolutions:
1. to appoint an Alternate Director
2. to take note of the disclosure of Interest received from the Alternate Director
3. to authorize Company Secretary or any Director to sign and file the relevant form with Registrar of Companies and to do such acts, deeds and things as may be necessary to give effect to the Board’s decision.
- Within 24 hours of the end of the Board Meeting, the Listed Company must notify the Stock Exchanges of the appointment and post it on the Company’s website within two working days. [Regulation 30 & 46(3) of the SEBI (LODR) Regulations, 2015]
- Prepare and distribute Draft Minutes to all Directors for comment within 15 days after the Board Meeting’s end, via hand/speed post/registered post/courier/e-mail.
vi. Filing of Return of Appointment of Director with the ROC
Within 30 days following the Board meeting, a Return of Appointment of Directorship (Form DIR-12) must be submitted with the Registrar, together with a copy of the Board Resolution, Consent, and Declaration. A Company Secretary/Chartered Accountant/Cost Accountant must also certify the return in the case of companies other than OPC and Small Companies. As an attachment to Form DIR-12, the following documents will be provided:
1. Certified True Copy of the Board Resolution passed.
2. DIR-2 Consent to Act as Director
3. DIR-8 Declaration by Director
4. Letter of Appointment.
vii. Making Necessary entries in Register of Directors
In Form MBP-4, the company should make the required entries in the Register of Directors and Key Managerial Personnel, as well as the registers of contracts and arrangements in which the directors have a stake.
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