Appointment of additional directors and alternate director

Additional Director

The appointment  at a board meeting or by a resolution passed by circulation. The person appointed can act as director up to date of next annual general meeting but he can be formally appointed at that meeting as per the provisions.

Alternate director

The board nay appoint an alternate director only if this is authorised by the articles. The articles of a private limited company may provide for appointment of an alternate director. See in this connection D.Gopal vs venkateshan seed co. Ltd (1989) 66 Comp.Cas. 383 (Coimbatore) in which a temporary injunction was granted directing the company to accept B as alternate director as alternate to the plaintiff, a non-resident director in the company.

Other clarifications of department

Where board meetings are equally held in different states, the department clarified that the state in which registration office is located would have to be taken in the state in which board meetings could be said to be ordinarily held – minutes of company law sub-committee held on 20-06-1972.

As regards interest of director, if the alternate director is attending a meeting. If he is interested in an item, that should be disclosed. Even if he is not and the original director is interested. The alternate should exercise his judgement whether he should part in proceedings.

Additional directors remaining in office without complying with section 260

In P.Moorthy v. Central government 2004 119 comp.cas.41 (Salem) it was held that all the additional directors had no right to remain on the board as their term came to an end long ago. Their failure to hold the annual general meeting could not be taken advantage of by them to hang on to the position of directors indefinitely.

Appointment at AGM of a person who was additional director or director against casual vacancy

Where it is proposed to appoint a person as a regular director at the AGM where he ceases to be additional director or where the duration of office of a person appointed in a casual vacancy comes to an end. It is proposed to make him a regular director, in either case a notice under section 257 shall be given to the company by a member with a deposit of Rs.500 at least 14 days before the meeting, signifying his intention to propose the person (acting as additional director or in a casual vacancy) for election as director at that general meeting.

Position in a private limited company

If the articles of a private limited company is  approve then the additional directors can be chosen in a private limited company. This company can manage the appointment of directors as stated in section 255. A private limited company may not have any allocation in its articles. The appointment of a person as director in a casual vacancy shall apply to a private limited company.

Procedure for appointments of directors in a public limited company

Before appointing a person as director, he shall give to the company his consent in writing to act as director if appointed – section 264(1). This as well as the requirement of filing consent of directors with the ROC is not applicable in the case of a private limited company which is not a subsidiary of a public limited company.

Person who gives notice to propose at the meeting

The person who gives the notice should also propose the resolution at the meeting. If he is not at the time of meeting, the person proposed for appointment cannot be appointed.

Private company exempted

The above right of a member to propose a person for directorship or of a person to stand for directorship shall not be applicable to a private limited company which is not subsidiary of a public limited company.

Provision of concept of independent directors may also be made in the act

Companies bill, 2008 introduced in parliament during October 2008 contained statutory provision regarding appointment of independent directors which will become law when the new act is enacted by parliament.

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