Being a director of a company is an important responsibility as you have ongoing duties and obligations to the company. If you are unable to fulfill your responsibilities you need to consider whether it is necessary to appoint an alternate director who will act in your absence.
An alternate director is a person who is appointed to act as a director, as a substitute for an existing director, for a specified period. It is important to note an alternate director is NOT a proxy so they will not be required to vote as you do. At law, alternative directors have the same rights, powers, duties and responsibilities as other directors.
After you have assessed your personal circumstances and determined that this is the best option for you, there are a number of steps that you need to take to make sure that the appointment is valid.
How to Appoint an Alternate Director
Step 1. Check whether you can appoint an alternate director as per the company’s constitution?
As you are well aware by now, your company’s constitution is essentially your corporate governance manual. When considering whether you can appoint an alternate director you need to check whether it is allowed under your constitution. Generally speaking, a company’s constitution specifies the rules of appointing an alternate director or it stays silent on this process.
If your company’s constitution does not mention alternate directors, then as per the Corporations Act (2001) an alternate director can be appointed. In this instance, the alternate director must be approved by the company’s Board of Directors.
If your company’s constitution does mention alternate directors, then this is where things can get a little trickier. You will need to refer to your company’s constitution to find out what the rules are for appointments in this situation as the terms vary from company to company. Some constitutions allow a permanent director to simply appoint an alternate without board consultation, whereas others can appoint an alternate by all agreeing without a board meeting. If you aren’t clear regarding the requirements considering your company constitution, always seek professional legal advice.
Step 2. Setting the terms of the Alternate Director
Regardless, whether your Company constitution is clear or not you need to make sure the terms of the alternate director are understood by all parties. At the very minimum, yourself, other board members and the alternate director should understand the voting rights of the alternate director, the attendance requirements of the alternate director, the circumstances in which the alternate is to act in their capacity as a director and the duration of the appointment.
Once everyone is clear on the terms of the appointment, the alternate director needs to accept the position in writing for it to be a valid appointment. Make sure you keep proper records of the appointment of the alternate director as ASIC may request this from you in future.
Step 3. Time to tell the boss (ASIC)
Once you have appointed a valid Alternate Director you need to notify ASIC within 28 days of the appointment. When you notify ASIC you need to provide them with the following details:
- Full Name and Former Names;
- Date and Place of Birth;
- Residential Address;
- Date of Appointment;
- The Name of the Director for whom the individual is an alternate;
- Expiry Date (if applicable). If the appointment is open-ended, provide the date of appointments only;
- Terms of Appointment – includes their capacity to sign documents on behalf of the company and to attend
directors meetings.
Conclusion
When you are temporarily unable to fulfil your obligation as a director you may be able to appoint an alternate director in your absence. What you can and can’t do when you are appointing an alternate director varies depending on your company’s constitution. If you’re not sure what’s appropriate, you can contact one of our experienced lawyers for a fixed quote regarding this matter .
