An alternate director is an individual appointed by a director to act on their behalf. They attend board meetings in the absent director’s place and have the same powers as the principal director. This practice is more common in small businesses where board attendance is crucial for decision-making and governance continuity.
Situations that require an alternate director
An alternate director helps to keep business processes flowing smoothly in case of the principal director’s extended absence or emergency situations. Their presence ensures that important board meetings can continue to run.
Alternate directors are also commonly appointed in multi-party joint ventures. Each member may elect an alternate director to represent their interests on the board.
In some cases, companies can appoint alternate directors to complement the primary director’s skills and expertise.
To manage conflicts of interest, an alternate director can be appointed to supervise specific transactions and business activities.
Purpose and function of an alternate director
An alternate director is responsible for upholding the same standards as the primary.
Role in governance
Alternate directors are entitled to the same responsibilities as the principal director. They must make decisions in their company’s best interests and uphold the same moral and ethical values. They must also ensure compliance with prevailing regulations and corporate governance standards.
Scope of function
The scope of the alternate director’s authority is similar to the director they represent. Instead of being viewed as the primary director’s agent or nominee director, they are seen as an officer of the organisation.
The job role is typically for a predefined, limited period. Once it ends, their work also ceases. Approval from the entire board is necessary before finalising an alternate director’s appointment.
Duties and responsibilities
The primary duties and responsibilities of an alternate director are:
- Staying updated with the company’s business operations and board activities, ready to step in at any moment.
- Performing the same duties as the primary director in their absence, including meeting attendance, voting and serving on specific board committees.
- Ensuring compliance with all applicable laws and governance standards.
- Communicating with the other board members, management, stakeholders and external advisors, sharing insights and engaging in discussions.
- Identifying, disclosing and managing conflicts of interest.
- Reporting back to the primary director on key decisions, developments and board meeting outcomes.
Liability and accountability
The alternate director’s full profile, including their qualifications, responsibilities and contributions, are documented in the annual report.
They are responsible for their actions and decisions in the same manner as regular directors. They can be held equally accountable for any breach of directors’ duties.
Alternate directors are also entitled to be compensated and indemnified by the company to the same extent as the directors they represent.
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