SECTION 161: APPOINTMENT OF ADDITIONAL, ALTERNATIVE AND NOMINEE DIRECTOR

SECTION 161 OF COMPANIES ACT, 2013

ADDITIONAL DIRECTOR: SECTION 161(1)

According to the Section:

1. The articles of a company may confer on its board of directors the power to appoint any person as an additional director at any time.
2. A person, who fails to get appointed as a director in general meeting, cannot be appointed as an additional director.
3. Additional director shall hold office up to the date of next annual general meeting or the last date on which the annual general meeting should have been held, whichever is earlier.

With a view to meet the requirements of the management, the board of directors is empowered to appoint any person as an additional director at any time if such power is granted by articles.

The person to be appointed as an additional director should possess DIN and must not be the person who fails to get appointed at the general meeting.

Term of office of additional director: The tern of additional director is limited to the holding of ensuring Annual General Meeting (AGM). Even if the AGM is not held on the last due date, the term ends there itself and it cannot be extended to a date when the AGM, in actuality shall be held in future after its due date.

ALTERNATE DIRECTOR: SECTION 161(2)

 According to this Section:

1. The Board of Directors of a company may, if so authorized by its articles or by passing a special resolution in general meeting, appoint a person, not being a person holding any alternate directorship for any director in the company or holding directorship in the same company, to act as an alternate director for a director during his absence for a period of not less than three months from India.
2. No person shall 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 the Act.
3. An alternative director shall not hold office for a period longer than that permissible by the original director in whose place he/she has been appointed and shall vacate office when the original director returns to India.
4. If the terms of office of original director is determined before he so returns to India, any provision for the automatic re-appointment of retiring director in default of another appointment shall apply to the original director only not to the alternate director.

An alternate director is appointed in place of regular director who has gone out of India. The period of absence of such original director from India must be minimum there months or more. A short absence of less than three months does not entitle the board to appoint alternate director.

Term of office of alternate director: The term of office of an alternate director coincides with the permissible term applicable to the original director in whose place he has been selected. Thus, the term shall not be longer than the term which is permissible to the original director. Further, the alternate director shall also vacate the office immediately on the return of the original director to India.

NOMINEE DIRECTOR: SECTION 161(3)

Subject to the articles of a company, the board may appoint a person as a director nominated by any institute 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.

Simply stated, a nominee director is not like any other director, He represents the body which makes nomination for appointment as a director in the company. Whenever a company obtains financial assistance from some financial institution or bank, such institution invariably nominates its representative for safeguarding its interest till the loaned amount is completely repaid. The Board od Director are empowered to appoint a nominee director subject to the articles and the shareholder cannot interfere with such appointment. Further, by virtue of shareholding in a Government company, the Central Government or the State Government may also nominate a person for appointment as nominee director and the Board shall have to follow the suit without any hinderance on its part.

CASUAL VACANCY: SECTION 161(4)

According to this section:

1. If the office if any director appointed by the company in general meeting is vacated before his term of office expires in the normal course, the resulting casual vacancy may, in default of and subject to any regulations in the articles of the company, be filed by the Board of Directors at a meeting of the Board which shall be subsequently approved by the members in the immediate next general meeting.
2. Any person appointed shall hold office only up to the date to which the director in whose place he is appointed would have held office if it not been vacated.

In case a company has appointed a women director because of statutory requirement and an intermittent vacancy is created in the office of such woman director, the board shall fill such casual vacancy at the earliest but not later than immediate next board meeting or three months from the date of creation of such vacancy whichever is later. Same in case of Independent Directors also.

Term of office of a director appointed to fill a casual vacancy: The term of office of a director appointed to fill a casual vacancy continues till such time up to which the term of the director because of whom casual vacancy was created would have continued.