Text of the provision of Section 161(2) of Companies Act, 2013 : The Board of Directors of a company may, if so authorised by its articles or by a resolution passed by the company in general meeting, appoint a person, not being a person holding any alternate directorship for any other director in the company, to act as an alternate director for a director during his absence for a period of not less than 3 months from India.
Provided that no person shall be appointed as an alternate director for an independent director unless he is qualified to be appointed as an independent director under the provisions of this Act:
Provided further that an alternate director shall not hold office for a period longer than that permissible to the director in whose place he has been appointed and shall vacate the office if and when the director in whose place he has been appointed returns to India:
Provided also that if the term of office of the original director is determined before he so returns to India, any provision for the automatic re-appointment of retiring directors in default of another appointment shall apply to the original, and not to the alternate director.
Board of Directors can exercise the power to appoint Alternate Director only if authorized by Articles of Association or by a resolution passed by the Company in a general meeting.
If authorized by Articles of Association or by a General Meeting resolution, Board can appoint any person as Alternate Director other than a person holding alternate directorship for any other Director in the Company.
Board of Directors can appoint alternate Director to act for the original director during his absence from India for a period of not less than 3 months.
Alternate Director can be appointed by passing a resolution in Board meeting or by circulation.
Alternate director vacates his office when the original director, in whose place he has been appointed returns to India or when the tenure of original director expires, whichever is earlier.
A person who is proposed to be appointed as alternate director for an independent director should be qualified to be appointed as an independent director.
If term of original director expires before the original director returns to India, any provision for the automatic re-appointment of retiring director in default of another appointment shall apply to the original, and not to the alternate director.
The following procedure is to be followed for appointment of an alternate director :-
1. Ensure that the Articles of the Company or members of the Company by passing a resolution in general meeting, authorise the Board of Directors to appoint alternate director. If not, either, alter the articles of association accordingly. [Refer Procedure for Alteration of Articles] or pass a resolution in general meeting authorizing the Board of Directors to appoint Alternate Director.
2. Ensure that the individual proposed to be appointed as an alternate director does not suffer from any disqualification mentioned under Sections 164 and 165 of the Act.
3. Ensure that the individual proposed to be appointed as an alternate director by the Board of Directors, is not holding office as Alternate Director for any other Director of the Company.(Section 161(2) of Companies Act, 2013
4. If the alternate director is to be appointed in respect of independent director, then ensure the person proposed to be appointed as the alternate director for an independent Director shall fulfill the condition specified in section 149(6) and Rule 5 of Companies (Appointment & Qualification of Directors) Rules, 2014.
5. Ensure that the person who is proposed to be appointed as Alternate Director must have a valid Director Identification Number (DIN) before being appointed as director. [Section 152(3)]. If he does not have DIN, follow the procedure prescribed for obtaining DIN.
6. Ensure that person proposed to be appointed as a director has furnished his DIN to the Company and a declaration in Form DIR 8 stating that he is not disqualified to become a director under the provisions of Companies Act, 2013. [Section 152(4) and Rule 14(1) of Companies (Appointment & Qualification of Directors) Rules, 2014].
7. Before appointing a person as alternate Director, Obtain his written consent to act as Director in Form No. DIR-2. Attachments to DIR 2 are as follows
8.A: If resolution for appointment is proposed to be considered at BM:
8.A.1 Issue not less than 7 days notice and agenda of Board meeting, or a shorter notice in case of urgent business, in writing to every director of the company at his address registered with the company [Section 173(3). Also follow the procedure prescribed for issuing and signing of notice of Board Meeting]
8.A.2 Hold a meeting of Board of Directors-
Pass the necessary Board Resolution for the appointment of Alternate Director to act for the original director during his absence from India. and shall vacate office when the director in whose place he has been appointed returns to India or tenure of original director expires, whichever is earlier. ( Second proviso to Section 161(2) of Companies Act, 2013.
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 Boards decision
8. B: If resolution for appointment is proposed to be considered by circulation:
8.B.1 The Chairman of the Board or in his absence, the Managing Director or in his absence, the Wholetime Director and where there is none, any Director shall decide, whether the approval of the Board for a particular business shall be obtained by means of a Resolution by circulation. (Point 6.1.1 of Secretarial Standards -1)
8.B.2 The draft resolution for appointment of an alternate director to act for a Director during his absence from India and shall vacate office when the director in whose place he has been appointed returns to India or tenure of original director expires, whichever is earlier, together with necessary papers shall be sent to all the Directors individually on the same day by hand/speed post/registered post/courier/e-mail/any other recognised electronic means to his email or postal address registered with the Company and in the absence of such details, to any address appearing in DIN registration details of the concerned Director. (Point 6.2.1 and Point 6.2.2 of Secretarial Standards -1)
8.B.3 The proposed agenda shall be explained by a note setting out the details of the proposal, relevant material facts that enable the Directors to understand the meaning, scope and implications of the proposal, the nature of concern or interest, if any, of any Director in the proposal, which the Director had earlier disclosed and the draft of the Resolution proposed. The note shall also indicate how a Director shall signify assent or dissent to the Resolution proposed and the date by which the Director shall respond. (Point 6.2.3 of Secretarial Standards -1)
8. B.4 Directors shall not be given more than seven days from the date of circulation of the draft of the Resolution, to respond. (Point 6.2.3 of Secretarial Standards -1)
8.B.5 If min. 1/3rd of Directors require the Resolution under circulation to be decided at a Meeting, the Chairman shall put the Resolution for consideration at a Meeting of the Board. (Point 6.1.2 of Secretarial Standards -1)
8.B.6 The Resolution is passed when it is approved by a majority of the Directors entitled to vote on the Resolution, The Resolution, if passed, shall be deemed to have been passed on the last date specified for signifying assent or dissent by the Directors or the date on which assent from more than two-third of the Directors has been received, whichever is earlier, and shall be effective from that date, if no other effective date is specified in such Resolution. (Point 6.3 of Secretarial Standards -1)
8.B.7 Resolutions passed by circulation shall be noted at the next Meeting of the Board and the text thereof with dissent or abstention, if any, shall be recorded in the Minutes of such Meeting. (Point 6.4 of Secretarial Standards -1).
9. Obtain the declaration from the appointed Director regarding his interest in other entities in Form MBP.1 within 30 days of appointment or at the first Board Meeting in which he participates as Director, whichever is earlier. (Section 184(1) read with Section 189(2) of Companies Act, 2013 and Rule 9(1) of Companies (Meetings of Board and its Powers) Rules, 2014.
10. File a return containing the particulars of appointment of director, with the Registrar in E-Form No. DIR-12 along with such fee as may be provided in the Companies (Registration Offices and Fees) Rules, 2014 within 30 days of such appointment. [Section 170(2) and Rule 8 and 18 of Companies (Appointment and Qualification of Directors) Rules, 2014]
Following details/documents are required for filing Form No. DIR-12:-
(a) Name and DIN of Director to whom appointee is alternate
(b) Details of interest in other entities.
(c) Consent of the appointee director in Form No. DIR-2, along with self-attested copy of ID & Address Proof
(d) Certified true copy of the extract of the Board Resolution passed for the appointment of Alternate Director.
(e) Letter of appointment; and
(f) Any other document as may be applicable and/or prescribed.
11. Obtain the following details from the Director for making entries in Register of Register of directors and key managerial personnel and their shareholding:
(a) Director Identification Number;
(b) present name and surname in full;
(c) any former name or surname in full;
(d) fathers name, mothers name and spouses name(if married) and surnames in full;
(e) date of birth;
(f) residential address (present as well as permanent);
(g) nationality (including the nationality of origin, if different);
(i) office of director or key managerial personnel held or relinquished in any other body corporate;
(m) the details of securities held by him in the company, its holding company, subsidiaries, subsidiaries of the companys holding company and associate companies relating to-
(i) the number, description and nominal value of securities;
(ii) the date of acquisition and the price or other consideration paid;
(iii) date of disposal and price and other consideration received;
12. Make necessary entries in the Register of directors and key managerial personnel and their shareholding [Section 170(1) and Rule 17 of Companies (Appointment and Qualification of Directors) Rules, 2014]
13. Obtain the declaration of independence from the director, in case of the independent director. (Section 149(7))
14. After appointment, the appointed director shall inform other companies in which he is a director, in Form MBP.1, about his appointment.(Section 184(1) of Companies Act, 2013).
15. Prepare and circulate draft minutes of the meeting within 15 days from the date of the conclusion of the board Meeting, by hand/speed post/registered post/courier/e-mail to all the Directors for their comments.. Follow the procedure prescribed for preparing, circulation, signing and compiling of Board Minutes.
16. Inform all concerned persons/ govt. authorities about the appointment of Director like Central Excise Authorities, Customs Authorities, Sales Tax Authorities, Service tax Department, Chief Inspector of Factories, and Regional Provident Fund Commissioner etc.