Key differences between an alternate director and a successor directorA successor director is a designated individual who will take over the role of a director when the current director resigns, retires, or passes away. Their role is to ensure continuity in the leadership of the company and carry on with the business’s objectives and strategies. Successor directors are typically chosen based on their skills, experience, and ability to lead the company effectively. For example, if you are a sole director and pass away without a nominated successor director, the future leadership of your business could be decided legally, putting your family’s source of income in jeopardy. An alternate director, on the other hand, is a temporary replacement for a director who is unable to attend a board meeting or fulfill their duties for a certain period of time. An alternate director is appointed by the board of directors to attend specific meetings and vote on behalf of the absent director. They do not have the same level of authority and responsibility as a regular director or a successor director. While both roles are important for the smooth functioning of a company, a successor director plays a more significant long-term role in ensuring the company’s future success.
|Alternate Director||Successor Director|
|Do you need to notify ASIC?||Yes||Yes – it’s a fully-fledged director|
|Power to sign circulating resolutions?||Yes||Yes|
|Power to vote at a meeting?||Yes, only when appointing director is not present||Yes|
|Can this position be counted as one of the total number of directors?||No||Yes|
|To serve in the role, is it necessary to hold the position of a director?||No||Yes|
|If the person who appointed someone to a position loses their capacity or passes away, does the appointed person’s position come to an end?||Yes||The occurrence of these events will automatically result in the appointment of the nominated successor director as an official director.|
When would my company require an alternate director?Companies may require alternate directors for various reasons, such as when directors have conflicting schedules or are unable to attend meetings due to illness or other personal reasons. Alternate directors can also be used to prepare for the eventuality that a current director will leave the board. This could happen due to retirement, resignation, or other reasons.
6 key things to consider when appointing a successor director:Let’s take a closer look at the appointment of a successor director and key things to consider.
- Vested interest: Select a successor director who has a strong stake in your company and will prioritize your interests.
- Skills and expertise: The right person should have the skills and expertise necessary to fulfill the duties of the departing director. They should also have the ability to contribute to the board in a meaningful way.
- Board composition: They should complement the existing board composition and bring a diverse set of skills and perspectives to the board.
- Company culture: It is important that the successor director be familiar with the company culture and values, and should be aligned with the company’s strategic goals.
- Succession plan: The company should have a clear succession plan in place that outlines the process for appointing a successor director, including any necessary approvals from shareholders or other stakeholders.
- Training and development: They should receive appropriate training and development to prepare them for their role on the board.