Alternate Directors

The directors serving on the boards of a number of listed issuers have nominated alternate directors to serve in their stead when they are unable to attend.

The articles of association of issuers under the 1973 Companies Act usually permitted a director to appoint his or her alternate with the approval of the board of directors. This arrangement still exists under the 2008 Companies Act as amended (the “Act”) but has also been expanded.

Appointment or election of alternate directors

Section 66(4) of the Act provides that a company’s Memorandum of Incorporation (“MoI”) –

  • may provide for-
    • the direct appointment and removal of one or more directors by any person who is named in, or determined in terms of, the MoI;
    • a person to be an ex officio director of the company as a consequence of that person holding some other office, title, designation or similar status, subject to subsection (5)(a); or
    • the appointment or election of one or more persons as alternate directors of the company; and
  • in the case of a profit company other than a state-owned company, must provide for the election by shareholders of at least 50 percent of the directors, and 50 percent of any alternate directors.

It is clear that the Act allows the MoI to empower any person, including a juristic person, to make such an appointment.  It also does not appear as if the person entitled to exercise this power, either owes a fiduciary duty to the company, or – in the case of a person – to himself be qualified to serve on the board of such company.

Disqualification of an elected / appointed alternate director

The only limitation is provided for in Section 66(6) in terms of which the election or appointment of a person as a director is a nullity if, at the time of the election or appointment, that person is ineligible or disqualified in terms of section 69.

Casual vacancies

In terms of Section 70(3) of the Act a casual vacancy in the office of:

  • an elected director can only be filled by a new election. This election must take place at the:
    • next annual general meeting of the company unless its MoI does not provide for such a meeting, or
    • within 6 months at a meeting of shareholders, or
    • by way of a poll of the shareholders conducted by way of a round-robin resolution in terms of section 60(3);
  • an appointed director can only be filled by a new appointment.

Remuneration of an alternate director

Section 66(8) of the Act provides that, except to the extent that the MoI of a company provides otherwise, the company may pay remuneration to its directors for their service as directors, subject to subsection (9). 

This would therefor include the remuneration accruing to alternate directors.

Section 66(9) of the Act provides that remuneration contemplated in subsection (8) may be paid only in accordance with a special resolution approved by the shareholders within the previous two years.