“I serve as a director on the boards of a number of private companies. Unfortunately, for health reasons I won’t be able to attend upcoming board meetings at some of the companies. Can I appoint a proxy to represent me and exercise my voting rights?”
The manner in which meetings of a board of directors of a company must be conducted and the voting procedure relevant to such meetings are regulated in terms of the Companies Act 71 of 2008 (“Companies Act”) and the memorandum of incorporation of the company (“MOI”).
In terms of the Companies Act directors can attend meetings by electronic means. A challenge however arises when a director is unable to personally attend a meeting or is not in a position to participate in the meeting through electronic means.
Given that the Companies Act requires a majority of the directors to be present before a vote may be called at a meeting, the entire voting process can be frustrated and decision making can be delayed if the majority of directors are not present and able to participate in the meeting.
The Companies Act allow shareholders of a company to appoint proxies and delegate certain duties to proxies such as attending shareholder meetings and voting on their behalf at such meetings. A proxy is therefore a representative or agent who is legally authorised to act on behalf of another party.
Unfortunately, the Companies Act does not afford directors of a company the same right to appoint a proxy to represent them at a meeting of the board of directors. The fiduciary duties of a director towards a company include the duty to attend meetings of the board of directors as well as a duty to vote on matters before the board. The aforementioned duties cannot be delegated by a director or assigned to a third party such as a proxy.
But, directors are not left entirely without a remedy. The Companies Act enables a director to appoint an alternate director. An alternate director is a person that is elected and appointed to serve, as the occasion requires, as a member of the board of the company in substitution for a particular elected or appointed director of that company. An alternate director therefore acts in the absence of the director for which they are appointed as alternative.
An important distinction can be drawn between a proxy and an alternate director. The alternate director does not serve in a representative capacity, but serves as if he/she is appointed as a director of the company. The alternate director accordingly needs to act in the best interest of the company and is subject to all of the fiduciary duties towards the company as contemplated in the Companies Act.
Although the appointment of alternate directors is regulated by the Companies Act, it is important to ensure that the MOI of the company addresses the nomination, appointment and service of an alternate director.
In your situation, if you are not able to attend the board meetings by electronic means and it is vital that you attend, consideration can be given to the appointment of an alternate director that can attend. Consider timeously consulting your attorney or the relevant company secretary regarding the option of an alternate director.