u can appoint an alternate director u/s 313 to hold office for the director who lives abroad..and the alternate director can attend the board meetings......
the details below can b of use to u......
S. 313. Appointment and term of office of alternate directors.- (1)The Board of Directors of a company may, if so authorised by its articles or by a resolution passed by the company in general meeting, appoint an alternate director to act for a director (hereinafter in this section called "the original director") during his absence for a period of not less than three months from the State in which meetings of the Board are ordinarily held.
1[(2) An alternate director appointed under sub-section (1) shall not hold office as such for a period longer than that permissible to the original director in whose place he has been appointed and shall vacate office if and when the original director returns to the State in which meetings of the Board are ordinarily held.]
1.Subs. for Act 65 of 1960, s.115.
(3) If the term of office of the original director is determined before he so returns to the State aforesaid, 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.
NOTES
Previous Act: Sec. 86-B
There is no provision similar to this section in the English Act.
Appointment by Board only
It must be noted that an alternate director can be appointed only by the Board of Directors and only in cases where the Board is authorised by the articles or by the company in general meeting, to make such appointment. The company in general meeting cannot itself exercise such power of appointment. It can only empower the Board to make the appointment at the Board's discretion.
Absence from the State
It will also be noted that absence from the State in which the meetings of the Board are ordinarily held, instead of from the district in which such meetings are held (as in the previous Act) is made the criterion for application of the provisions of this section.
It must further be noted that the State in which Board meetings are held need not necessarily be the State where the registered office of the company is situate. Absence from the State where the registered office is situate will not, unless it is also the State where Board meetings are ordinarily held, enable the appointment of an alternate director.
Sub-section (2) has been amended so as to make it clear that an alternate director is not to hold office for a period longer than that permissible for the original director. Subject to this condition, there is no limit on the period during which the alternate may act.
His office as director will ipso facto cease with the ceasing from any cause whatever of the office of the director for whom he is substitute.
The expression "as such" in sub-section (2) means "in his capacity of alternate director". If he holds any other office than that of alternate director that office will not be vacated.
Where an alternate director is appointed only by a resolution of the Board of Directors, the absence of the original director from meetings of the Board will not entail vacation of his office as required by section 283(1)(g), as it is presumed in such case that leave of absence has been given by the Board.
1. Department's view
Query : Would section 313 of the Companies Act, 1956, apply to a case where the original director was expected to be away from the State for more than three months, but not continuously? The section 313 referred only to a "period" and not to "a continuous period". Disability to appoint an alternate director created difficulties at times, and this was accentuated where business has to be put through at a board meeting (and not by circular), and it became necessary to have a quorum of non-interested directors.
Answer : The word "period" in the context in which it is used in section 313 would mean "any portion of time" according to the CONCISE OXFORD DICTIONARY OF CURRENT ENGLISH. In this sense, it would indicate a "continuous" period only. Hence, there should not be any break in the absence of the original director from the State in which meetings of the board of directors of the company are ordinarily held, if the provisions of section 313 are to be brought into play. [Minutes of meeting of Company Law Sub-Committee of BCCI with Regional Directors, DCA held on 28-09-1966].
II. Department's views.- Thealternate also vacates office as and when the original director returns to the State where the original director attends a Board meetings are held. This is so whether the meeting or not. (Letter No. 6/16/(313)/68-PR, dated 5-2-1963.)
Vacation of office by alternate director on original returning to state
Department's Clarification I
Under section 313(2) of the Companies Act, 1956 an alternate director vacates his office if and when the original director returns to the State in which the board meetings are ordinarily held irrespective of the fact whether the original director attends a board meeting or not. [Department's Letter No. 6/16(313)/63-PR, dated 5-2-1963.
Department's Clarification II
Query : Under sub-section (2) of section 313 of the Companies Act, 1956, an alternate director vacates office if and when the original director returns to "the State in which meetings of the board are ordinarily held". 12 meetings of the board of directors of a company are held in a year. 4 of such meetings are held in Bombay (State of Maharashtra), 4 meetings are held in Madras (State of Tamil Nadu); and 4 meetings are held in Bangalore (State of Mysore). In such a case where, according to the department, the board meetings of the company can be said to be ordinarily held?
Answer : In such a case the State in which the registered office is situated would have to be taken as the State in which meetings of the board could be said to be ordinarily held. [Minutes of meeting of Company Law Sub-Committee of BCCI with Secretary, DCA held on 20-06-1972.]
Articles must authorise appointment
Note that the power of appointing an alternate director is given to the Board and not to the original director in whose place the alternate is appointed, and the Board may exercise the power even though the appointment may not be to the liking of the original director.
Mala fide refusal to appoint alternate director
The court will compel the appointment of an alternate director where such appointment has been refused by the company for mala fide reasons. Where 40% interest of an Indian company belonged to a U.S. company which had for watching its interest appointed a director who, being not able to attend, asked the directors to accept an alternate director in his place, and the directors perfunctorily refused his request, the High Court of Delhi said that they had no right to do so and that the question of the appointment of an "alternate" must be considered fairly in the interest of the company and its shareholders. D. Ross Porter v. Pioneer Seed Co. Ltd., (1989) 66 Com Cases 363, 369 (Delhi).
Foreign director
Alternates are most commonly appointed by foreign directors in enterprises run with foreign collaboration or otherwise carried on or managed wholly or partly by foreigners or with foreign capital in this country.
Position of alternate director
An alternate director is, in respect of compliance with the provisions of this Act, in the same position as any other director as regards his rights, duties and liabilities as a director. For instance, the provisions of section 274 relating to disqualifications, of section 283 as regards vacating of office, of section 284 as regards his removal, and of section 314 as regards the holding of any office of profit, and of sections 268, 269, 309, 310 and 311 so far as they are applicable to his case will all apply to an alternate director to the same extent as they will apply to any other director. He is also bound by the provisions of sections 297 and 299 and must disclose the nature of his concern or interest, if any, in contracts and arrangements of the company and sections 300 and 301 also apply to him. He will also be liable in misfeasance proceedings in a winding up.
An alternate director is not a proxy or an agent of the original director-he acts on his own.
There is no impediment in the way of his being an additional director, if the Board so decides and if the articles of the company contained provision therefor.
Effect of original director's interest upon alternate
Query : Could an alternate director be said to be "interested" in a contract or arrangement in which the original director was interested but the alternate director himself had no interest whatsoever?
Answer : If an alternate director is attending a board meeting, the question to be considered is whether he is interested/concerned in a transaction to be considered thereat and even if he is not, whether he would be exercising his independent judgment on the transaction for deciding whether he should take part and vote in the proceedings thereon. Minutes of meeting of Company Law Sub-Committee of BCCI with Regional Director, DCA held on 28-09-1966.
Share qualification
It must also be noted that where the articles prescribe a share qualification for the office of director, the alternate must possess or acquire the qualification as provided in section 270.
Department's Clarification
Query: Whether the provisions of the Companies Act, 1956 in section 264 (consent to act as director), 266(1) (restriction on appointment/re-appointment of director), 271 (share qualification) and 303 (register of directors) are also applicable to alternate directors appointed under section 313?
Answer: The provisions of sections 264, 271 and 303 have to be complied with by, and in respect of, an alternate director. However, the provisions of section 266(l) are not applicable to such a director except where the articles require its directors to hold a specified share qualification in which case the alternate director is required to file with the Registrar concerned a declaration as to the share qualification held by him within two months of his appointment although he may cease to be a director within these two months. Departments Letter No. 8/9 (313)/61 -PR, dated 7-8-1961.
Register of directors, particulars and consent to be filed
Particulars of the appointment of an alternate director and termination of -the same must be furnished to the Registrar as required by sections 303(2) and (3) and he must be included and dealt with in the Register of Directors and Register of Directors' shareholdings in the same manner as the original director. And all the provisions relating to retirement, vacation of office and removal from office of director will apply equally to an alternate director.
Secretarial Action Points for appointment of alternate director
1. Check the articles of association of the company to see whether it authorises the appointment of alternate director.
2. Obtain the written consent of the person to be appointed as an alternate director.
3. Convene a Board meeting and pass the resolution for appointment of alternate director to act for the original director during his absence for a period of not less than three months from the State in which the meetings of the Board are ordinarily held.
4. Ensure that the alternate director is appointed to hold office as such for a period not longer than that permissible for the original director in whose place he has been appointed.
5. Ensure that the alternate director vacates office if and when the original returns to the State in which meetings of the Board are ordinarily held or when the term of office of the original director expires.
6. Ensure that the director does not suffer from any of the disqualification mentioned in sections 274, 275, 278 and 283 of the Companies Act.
7. Follow the procedure mentioned in items 7 to 15 as listed in Procedure for appointment of director other than retiring directors'.
8. If the office of the original director is determined before the director returns, ensure that the provision for automatic reappointment of retiring director is applied to the retiring director and not to the alternate director.
Secretarial Practice Notes : Appointment and terms of alternate directors
Check whether the articles or a resolution of the company passed in general meeting provide for the appointment of alternate directors? If so, check that:
(i) the appointments were duly made;
(ii) Form 32 filed with the Registrar;
(iii) the requisite information duly given by the directors;
(iv) particulars entered in the register of directors;
(v) the alternate director effectively vacated office on the return of the original director to the State or on the expiry of the original director's term; (Provision for the automatic reappointment of retiring directors in default of another appointment does not apply to an alternate director);
(vi) stock exchange was informed about the appointment in the case of listed company.
Documents Involved: 1. Articles, 2. Minutes of Board/General Meeting, 3. Forms 29 and 32, 4. Register of Directors.
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