In Companies Act 1956, there were separate sections for Additional Director, Alternate Director, Nominee Director and Casual Vacancy. But, all such provisions are now merged into a section 161 of Companies Act, 2013.
If you have missed out the provisions related to loan to director then you can read section 185 here
Section 161(1):
Additional Director
·
* Section 161(1) is applicable to all companies.
·
* If the Articles
authorize, the Board may appoint additional directors. Regulation 66 of Table F of *Companies Act, 2013 authorise board to
appoint additional directors.
·
*Additional
directors together with the directors should not exceed the maximum number
fixed by the articles.
·
*A person who fails to get appointed as a director in general meeting can’t be
appointed as an additional director.
·
*Additional directors hold office only up to the date of the next AGM of
the company. If the AGM is not held, additional director is deemed to vacate
office on last day on which AGM should have been held.
·
*Additional director will enjoy the same powers and rights as other
directors.
·
*The appointment of additional directors may, be
made either at a meeting of the Board or
by passing a resolution by circulation.
·
*General
meeting can appoint additional director, if board is unable to appoint
additional director.
Point
to be noted
Any director can be appointed as a MD or
WTD. Companies Act do not prohibit appointment of additional director as MD or
WTD. An additional director hold office upto date of AGM and if the company at
the AGM does not re-appoint him as a director, he will automatically vacate his
office as MD or WTD also.
Section
161(2): Alternate Director
·
* If any director of company is absent or leave
for a period of 3 or more months from
India, company may appoint any other person as director in his place. Such
a director is called as alternate director.
·
* The BOD
may appoint alternate director if:
-> Authorized
by its articles or
-> By resolution at GM.
·
*Board can appoint alternate director either at
its meeting or passing resolution by
circulation.
·
*Person shall not be appointed as alternate director
for an independent director unless
he is qualified to be appointed as independent director under Companies Act,
2013.
·
*The person appointed as alternate director shall
not hold any alternate directorship for
any other director in the company.
·
*Section 161(2) is applicable to all companies.
·
*Alternate director is subject to the same liability and supposed to perform
the same duties as any other director. Alternate director is neither agent nor proxy of original
director.
·
*An alternate director appointed as such for the
first time shall be required to file his
consent with the Registrar.
Tenure
of alternate director
·
*An alternate director vacates his office where:
-> Original director return to India.
->Tenure of original director is expired.
-> Original director dies.
->Original director vacates his office.
->Original director resign from his office.
Point to be noted
The office of Alternate Director is nowhere related to the attendance of
the Original Director in the Board Meeting. The office of Alternate Director shall
be terminated if original director whom he replaced returns to India. Hence,
joining the meeting by video conferencing by the original director will not
vacate the office of the alternate director.
· *
If original director is a non-retiring director, an alternate director appointed in his place
can continue till the time original director vacate his office or return to
India.
·
*If original director is rotational director and his term expires before he returns to state
where board meetings are ordinarily held, provision of automatic reappointed is
applicable to original director and not alternate director.
Section
161(3): Nominee Director
· *
Board of Directors can appoint director
nominated by:
-> Any financial
institution in pursuance of any law or agreement.
-> Central
government or state government by virtue of its shareholding in government
company.
-> Any other
person who represent its interest.
·
*It means, the directors appointed by any private equity investor may be covered
in the above third category.
·
*Board may appoint nominee director subject to
provisions in its article of association.
Point
to be noted
As per section 161(3), Nominee director is
appointed pursuant to loan agreement or government shareholding in government
company.
Section
161(4): Casual Vacancy
·
*Casual vacancy means a vacancy in the office of
a director appointed by the shareholders in a GM and caused by the death, resignation, insolvency or
disqualification.
·
*It does not include vacancy created due
retirement of director by rotation. If the tenure director expires then it is
not casual vacancy.
·
*Directors appointed in GM vacated office before
the expiry of his term; board in its meeting can fill in vacancy. But if
director appointed by board vacate before his tenure, it is not casual vacancy.
·
*Board can’t fill up casual vacancy by circular
resolution.
·
*The person appointed in casual vacancy will hold
office till time person in whose place he has been appointed could have held
office.
·
*Section 161(4) is not applicable to a private company.
·
*A private company can fill casual vacancies as
person provision of its articles or by
passing resolution in GM.
Comparison
among section 161(1), 161(2) and section 161(4)
|
Particulars
|
Additional Director - Section 161(1)
|
Casual Vacancy - Section 161(4)
|
Alternate Director - Section 161(2)
|
|
Appointment
|
If authorised by articles
|
No authorisation from articles required. Board has the power to
appoint.
|
If authorised by articles or by passing a resolution in GM
|
|
Counted in Maximum
|
Yes
|
Not applicable
|
No
|
|
Tenure
|
Upto the date of next AGM
|
For the entire unexpired period in whose place he is appointed
|
He can't hold the post for a period longer than permissible to
original director and vacate when such original director returns to India
|
|
Applicability
|
All companies
|
Public company
|
All companies
|
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