Procedure for Appointment of Alternate Director

Introduction

The Board of Directors of a Company may appoint a person, not being 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 for a period of not less than 3 months from India. [Section 161(2)]

Mandatory Requirements for the Appointment of Alternate Director

1. Board of Directors can only appoint Alternate Director if authorized in Articles of Association (AOA) to the Board or there is a resolution passed by the Company in a General Meeting.
2. The Alternate Director has to vacate the office when the Original Director returns or when the tenure of the Original Director expires.
3. The person proposed to be Alternate Director for an independent director should be qualified to be appointed as an Independent Director.
4. The person proposed to be the Alternate Director should not come under any of the disqualifications mentioned under Section 164 and 165 of the Companies Act, 2013.
5. The person proposed should not hold any office as Alternate Director of any other Original director in the Company.
6. The person should also have a Directors Identification Number (DIN) and Digital Signature Certificate (DSC).

The Following Procedure is to be followed for “Appointment of Alternate Director”

1. Check the Article of Association of the Company Refer the AOA, if not authorized by the AOA then it needs to be altered for the appointment of the Alternate Director. [Refer Procedure for Alteration of Articles]
2. Obtaining DIN and Digital Signature Certificate
   • If the person does not have Digital Signature, he shall obtain Digital Signature from Certifying Authority in India.
   • The person shall have a valid DIN allotted by the Ministry of Corporate Affairs. At present, application for allotment of DIN can be submitted to MCA only through the company where he/she is proposed to be appointed.
   • The Application for DIN is required to be countersigned by a Director of the Company and a copy of resolution approving the proposal of appointment is also to be submitted by the person in Form DIR-3 with MCA with his ID Proof & Address proof, duly digitally signed by him and a Director of the Company in which the person is intended to be appointed as Director.
   • 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
3. The Appointment of Alternate Director can be done in two ways A. By passing of Resolution in Board Meeting, OR B. By passing of Resolution through CirculationA: Convene a Meeting of Board of Directors [As per section 173 & Secretarial Standard-1 (SS-1)]
   • Issue Notice of Board Meeting to all the Directors of Company at their addresses registered with the Company, at least 7 days before the date of Board Meeting. A shorter notice can be issued in case of urgent business.
   • Attach Agenda, Notes to Agenda and Draft Resolution with the Notice.
   • Hold a meeting of Board of Directors of the Company to discuss the agenda.
   • Pass requisite Board Resolution with respect to appointment of an Alternate Director.
   • 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.
   • Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board Meeting, by Hand/Speed Post/Registered Post/Courier/E-mail to all the Directors for their comments. [Refer the Procedure for Preparation, Signing and Compilation of Minutes]
   ORB: Appointment of Alternate Director by a Circulation in the Board Meeting
   • The Chairman of the Board or in his absence, the Managing Director or in their absence, any Director other than an Interested Director shall decide before the draft Resolution is circulated to all the Directors, whether the approval of the Board for a particular business shall be obtained by means of a Resolution by circulation.
   • The drafted Resolution with all the necessary documents will be sent same-day through Speed Post/E-mail/By Hand/Registered Post/Courier or any recognized means to the registered postal addresses of all Directors.
   • The Resolution should explain all details of the proposal, the material facts which explain the meaning, scope and implications of the proposal made and its nature.
   • The Directors shall have to respond within seven days from the date of circulation.
   • If the minimum of 1/3rd Directors wants to decide the Resolution under circulation in a Board Meeting, then the Chairman should put the Resolution on hold and to be considered at a Board Meeting.
   • The Resolution is deemed to be passed when the majority of the Directors entitled to vote approves for the Resolution.
   • Resolutions passed by circulation shall be noted at a subsequent Meeting of the Board and the text thereof with dissent or abstention, if any, shall be recorded in the Minutes of such Meeting.
4. Consent and Declaration from the Proposed Director The Proposed Director has to submit Form DIR-2 (Consent to act as a Director) and Form DIR-8 (Intimation by Director about his disqualification) to the Company either before the Board Meeting or during the Board Meeting.
5. Filing of Return of Appointment of Director with the ROC After the Board meeting, a Return of Appointment of Directorship (Form DIR-12) is required to be filed with Registrar within 30 days of appointment with copy of Board Resolution along with Consent and Declaration. In case of Companies other than OPC and Small Company, the return is also to be certified by a Company Secretary/Chartered Accountant/Cost Accountant. Following documents will be required as an attachment with Form DIR-12:
   • Certified True Copy of the Board Resolution passed.
   • DIR-2 Consent to Act as Director
   • DIR-8 Declaration by Director
   • Letter of Appointment.
6. Obtain Form MBP-1 from the Appointed Alternate Director Obtain the declaration from the Appointed Alternate 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)]
7. Making Necessary entries in Register of Directors Company should make necessary entries in the Register of Director and Key Managerial Personals.
8. File Necessary Amendment Application under 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