How does a business operate when a director is absent?

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With the holiday season upon us many companies may find themself faced with the prospect of a missing director. But with a little planning, this shouldn’t present a problem to the organisation being able to continue to operate in the director’s absence.

Directors’ decisions

The articles of association of most companies place responsibility and power for carrying on the company’s business in the hands of its directors collectively. So, the absence of one director would not normally prevent a board meeting being held, and decisions being taken, provided any remaining directors present were sufficient to make up the required quorum. Remember, however, that the company should still give notice of the board meeting to the missing director in the usual way it has adopted for doing this.

A viable alternate?

If a director’s absence would make any board meeting inquorate, it may still be possible to hold a meeting via telephone provided this was permitted under the company’s articles of association. However, this would mean interrupting the absent director’s holiday and may not be viable if they are uncontactable (which may be why they wanted a holiday in the first place!).

To cater for a missing director, the articles of association of some companies permit directors to appoint an ‘alternate’. This is someone who can step into the shoes of the missing director and perform the role of company director. Rather than being the agent of the appointer, an alternate acts as a director of the company and will be responsible for her own actions. A director will only be able to appoint an alternate, however, if this is specifically permitted in the company’s articles. Any formalities set out in the articles regarding the process for appointing an alternate would need to be followed.

Signing documents

Anyone with express or implied authority can sign a simple contract for a company. This would include each of its directors but also anyone else whom the board has authorised to sign on behalf of the company. If the directors know that the availability of appropriate signatories could be affected by holiday absences, they could hold a meeting before people jet-off at which nominated individuals could be given authority to sign documents on behalf of the company.

Executing deeds

There are three alternative methods by which a company can execute a deed:

  • by affixing its common seal (in which case the provisions of the company’s articles regarding use of the seal would have to be complied with, in terms of who has to sign next to the seal);
  • by the signature of a single director signing in the presence of a witness; or
  • by the signature of two authorised signatories, but an “authorised signatory” for these purposes is just a director or secretary.

If none of these options will be available in the absence of a director, the company itself will need to appoint an attorney. The company’s articles should be checked to confirm that it has the ability to exercise this power to appoint an attorney (the Model Articles contain such a provision). The power of attorney itself would need to be executed by the company using one of the three methods outlined above. Once appointed, the attorney would then be able to sign documents or execute deeds on behalf of the company.

What if the company only has one director?

Sole directors need not abandon the hope of ever having a holiday. They could appoint an alternate to formally manage the business in their absence or, if happy to be contacted, they could authorise key decisions by phone or email.

For signing documents, a sole director could either rely on an alternate or else execute a power of attorney in the name of the company (as above), appointing an attorney to sign documents on behalf of the company itself.

A relaxing break

With a little planning, the absence of a director should not prevent a company from taking decisions or signing documents, enabling the director to have a relaxing break and return to work rested and raring to go.

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