Section 161: Appointment of Additional Director, Alternate Director and Nominee Director

A clarification on Section 161 of Companies Act, 2013 regarding appointment of Directors

1. Additional Director

Applicability: Both Public & Private Companies

Type of Meeting: Board Meeting

The articles of a company may confer on its Board of Directors the power to appoint any person, other than a person who fails to get appointed as a director in a general meeting, as an additional director at any time.

However if a person fails to get appointed as a director in the general meeting, cannot be appointed as an additional director for the further period.

An additional director shall hold office up to the date of the next Annual General Meeting or the last date on which the Annual General Meeting should have been held, whichever is earlier.

2. Alternate Director

Applicability: Both Public & Private Companies

Type of Meeting:  General Meeting

The Board of Directors of a company may, if so authorized by its articles or by a resolution passed by the company in annual general meeting, appoint a person, to act as an alternate director for a director during his absence for a period of not less than 3 months from India.

A person shall not 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. 

It means that only an independent director can be appointed as an alternate director to an independent director.

An alternate director shall not hold office for a period longer than 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.

In case the term of office of the original director is determined before he 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.

3. Nominee Director:

Applicability: Both Public & Private Companies

Type of Meeting:  Board Meeting

It provides that subject to the articles of a company, the Board may appoint any person as a director nominated by any institution in pursuance of the provisions of any law for the time being in force or of any agreement or by the Central Government or the State Government by virtue of its shareholding in a Government company. 

4. Director appointed in Casual Vacancy:

Applicability: Public Companies only

Type of Meeting:  Board Meeting

Section 161(4) deals with appointment of Director in casual vacancy.

A casual vacancy occurs in the Board, when the office of a director, appointed by the shareholders in the general meeting is vacated before the expiry of his term either due to death, resignation, or insolvency of the director.

Further, a person appointed as a director to fill the casual vacancy cannot be re-appointed at the general meeting at the time when the director in whose place he was appointed will have retired.

Failure of an elected director to accept the office may also constitute a casual vacancy. Such vacancy will need to be filled up in terms of the articles of association of the company. If there is no provision in the articles, the Board still has the power to fill up the vacancy.

The casual vacancy shall be filled by the Board of Directors at a meeting of the Board.

Any person so appointed as a director to fill the casual vacancy shall hold office only up to the date up to which the director in whose place he is appointed would have held office, if it had not been vacated.
However, in case of such a vacancy in a private company, the same can be filled as per Section 152(2) of the Companies Act, 2013 in the general meeting only.

References:

Companies Act, 2013


Contact:
CS Divyanshu Bansal
Email: divyanshubansal401@gmail.com