Section 161: additional, alternate, nominee and casual vacancy directors

Introduction

The section covers four Board appointments. An additional director (sub-section (1)) holds office until the next annual general meeting or the last date by which it should have been held, whichever is earlier. An alternate director (sub-section (2)) acts for a director absent from India for at least three months. A nominee director (sub-section (3)) is nominated by an institution, under an agreement, or by a government shareholder of a Government company.

Under sub-section (4), the Board can fill a casual vacancy in the office of a director appointed in general meeting. Section 51 of the Companies (Amendment) Act, 2017, in force from 9 February 2018, extended this to all companies and required the appointment to be approved by members at the next general meeting.

Key takeaways

Additional directors

The articles may give the Board power to appoint any person as an additional director, other than a person who failed to get appointed as a director in a general meeting. The additional director holds office up to the date of the next annual general meeting or the last date on which it should have been held, whichever is earlier.

• India Code — consolidated Companies Act, 2013, section 161
• eGazette — MCA notification S.O. 2754(E), 12 September 2013 (commencement from 12 September 2013)
• eGazette — MCA notification S.O. 902(E), 26 March 2014 (commencement from 1 April 2014)
• eGazette — Companies (Amendment) Act, 2017 (No. 1 of 2018)
• eGazette — MCA notification S.O. 630(E), 9 February 2018 (commencement of Act 1 of 2018 provisions)

Alternate directors

If authorised by the articles or by a resolution in general meeting, the Board may appoint an alternate director for a director during their absence from India for not less than three months. Since 9 February 2018, the appointee cannot be a person already holding an alternate directorship for another director in the company or holding a directorship in the same company.

An alternate for an independent director must be qualified to be an independent director. The alternate cannot hold office longer than the original director could, and vacates office when that director returns to India. If the original director’s term ends before return, any automatic re-appointment provision applies to the original director, not the alternate.

Nominee directors

Subject to the articles, the Board may appoint a director nominated by an institution under any law or agreement, or by the Central or State Government by virtue of its shareholding in a Government company.

Casual vacancies

If the office of a director appointed in general meeting falls vacant before the term ends, the Board may fill the casual vacancy at a Board meeting, in default of and subject to any regulations in the articles. The appointee holds office only until the date the original director would have held office.

Section 51(ii) of the Companies (Amendment) Act, 2017 (in force from 9 February 2018 under S.O. 630(E)) omitted the words “in the case of a public company”, so the power now applies to every company, and added that the appointment must be approved by members in the immediate next general meeting.

Practical preparation

Check the articles for the relevant Board power; confirm the appointee holds a DIN and is not disqualified; for an alternate, confirm the original director’s absence from India for at least three months; for a casual vacancy, appoint at a Board meeting and place it before the next general meeting; track the tenure end date of each appointee.

Practical checklist

Glossary

Additional director

A person appointed by the Board between general meetings under power in the articles.

Casual vacancy

A vacancy in the office of a director appointed in general meeting that arises before the term expires in the normal course.

Frequently asked questions