An alternate director can temporarily replace a permanent member of a corporation’s board of directors in certain special circumstances, with approval from the other directors. The fiduciary responsibility of overseeing the corporation’s affairs cannot be transferred to a third party.
An alternate director is a person selected to temporarily replace a permanent member of a corporation’s board of directors. Corporate law in most countries does not normally allow directors to transfer their fiduciary responsibility for overseeing the corporation’s affairs to a third party. This standard rule of law may be overridden by specific provisions in the corporation’s bylaws or by-laws that allow an outside person to act in place of a director in certain special circumstances.
A corporation’s board of directors sets the overall direction of the corporation, hires executive officers to run day-to-day operations, provides oversight to ensure the corporation operates to maximize shareholder value, and is in compliance with government regulations. . Your legal obligation to act in the best interest of the company is fiduciary and stems from a jurisdiction’s corporation charter. This means that a director who fails to attend meetings or cannot devote an adequate amount of attention to company affairs could be held personally liable for impropriety if something goes wrong on his watch.
Directors are elected in accordance with the provisions of the corporation’s by-laws. There are a finite number of directorships, and the position has significant responsibility for the company’s business. It is in the company’s interest to control the term of service and the method of replacing board members when terms expire. Appointment to a board is never an open process and the position cannot be passed to another without going through an election process. There are times when a director is functionally unavailable to perform his regular duties, in which case the board may decide to allow him to appoint an alternate director.
A director may be functionally unavailable for medical reasons, for example, or due to a family emergency. He may need to step away from his duties for a finite period of time, but he does not wish to relinquish his position. Provided the articles or by-laws of the corporation make provisions or do not speak, the board may vote to allow the director’s selection of an alternate director to serve as his proxy.
The approval of the other directors for the selection of the alternate director is essential. Any selection made by the unavailable director may be rejected if the person is deemed unsuitable. Proper selection of a qualified individual can allow board business to proceed uninterrupted, particularly if the absence of a board member affects quorum requirements in voting for important actions.
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