Appointing an alternate director

If permitted by the company’s articles, directors can appoint an alternative to stand in their place. When is this sort of delegation appropriate and how do you go about it?

What is an alternate director?

An alternate director takes over the office and functions of their appointor. This sort of delegation is only appropriate in cases where a director knows that they will be absent for a period of time, such as a sabbatical, parental leave or lengthy sick leave.

Often such a delegation is unnecessary because the other directors can run the company in the absence of one director. However, it is useful in smaller companies where there is a sole director, or where the absent director has particular expertise or represents certain interests. For example, in a business run by two families that is structured so that there are two directors from each family on the board to ensure that one family does not dominate, appointing an alternate from the relevant family to cover a director’s absence would preserve that balance of power.

Can I appoint an alternate?

This depends on your company’s articles. Table A Articles contain this power, so do the Model Articles for public companies. However, the Model Articles for private companies do not. If your company’s articles do not include the power, it is possible to ask the shareholders to change them, see the Written Resolution to Alter Company’s Articles of Association.

Formalities

An appointment is made simply by a director giving notice to the company. The articles usually require the written consent of the alternate. If the alternate is not already on the board, the articles usually require the appointment to be approved by the board.

What does the alternate need to know?

The alternate steps into the director’s shoes, so they take on all of their appointor’s rights, responsibilities and liabilities. It is therefore not just a token appointment, and alternates should make sure that they are aware of what is involved before accepting the position. See our notes on Directors and Directors’ Liability for further information.

Removal

Depending on the articles, the alternate can usually be removed by their appointor giving notice to the company. The appointment automatically comes to an end if their appointor ceases to be a director for any reason.