New Zealand: All care, all responsibility - duties of an alternate director

Brief Counsel
Last Updated: 12 April 2013
Article by Roger Wallis, Geof Shirtcliffe and Alister McDonald

Alternate directors are already quite widely used in New Zealand and may become even more popular when the New Zealand resident director requirements in the Companies and Limited Partnerships Amendment Bill become operative. We look at the role of an alternate director.

Appointment of an alternate

The New Zealand Companies Act regards directors as directors "by whatever name called". Hence it makes no specific reference to alternate directors but requires them to satisfy the normal registration and consent to act procedures applying to regular directors.

This is in contrast with the Australian Corporations Act which provides (section 201K) that, with the other directors' approval, a director may appoint an alternate to exercise some or all of the director's powers for a specified period. This 'replaceable rule' can be changed by an Australian company constitution.

The only authority to appoint an alternate director in New Zealand is the company's constitution. Typical constitutional provisions include:

  • a method for appointing the alternate – usually by notice from the appointer, and often requiring a majority of directors to agree to the appointment
  • that the alternate cannot have an alternate
  • that the alternate's tenure ceases when his or her appointor ceases to be a director
  • the terms on which the alternate is to act.

The Companies Office website provides some additional guidance:

  • an alternate must sign the usual director's consent to act, and
  • the company must notify the Registrar of Companies of the appointment within the required 20 days (making no mention of the alternate status as this is "an internal matter for the company, recognised by the fact that the Companies Act refers simply to directors without further distinction").

Uses of an alternate

Alternate directors are commonly used:

  • to maintain a quorum where board numbers are small
  • to preserve the collective voting position of nominee directors appointed by a particular shareholder, or
  • where an overseas-domiciled director has been appointed to provide specific expertise or knowledge but whose attendance at board meetings will be necessarily patchy.

Duties of an alternate director

The fact that the Companies Act does not distinguish between directors and alternate directors means that for the purposes of New Zealand law, they are one and the same and are subject to the same duties and obligations.

This is also the burden of the limited international case law which exists on the subject.

The following three cases are significant.

In Markwell Bros Pty v CPN Diesels1, the Supreme Court of Queensland found that, although the alternate directors in question had little control over the company, they were "in the eyes of the law in the same position as any other director" and as such, were "subject to the normal duties which a director owes to his company".

In Trustees of the Orange River Land & Asbestos Co v King2, the High Court of Griqualand West in South Africa found that the alternate director rather than his or her appointor is responsible for any misdeeds or omissions while acting as a director:

"The director left an alternate behind him as he was authorised to do...He might fairly have assumed that his co-directors and his alternate would perform their duties as directors during his absence".

And in Strathmore Group Limited v Fraser & Ors3, the High Court of New Zealand held that:

"an alternate director is a director pro tem. When he or she is acting as a director, he or she has the rights, powers, privileges, duties and responsibilities of a director. When he or she is not acting as a director, then he or she has no legal status."

Personal responsibilities

Alternate directors can expect to be held to the same tests as their appointor would in the same circumstances. Although they are serving in place of their appointor, they cannot blindly follow any instructions their appointor (or others) may give them.

They are required to apply their own judgement.

Hence the courts' findings in recent litigation concerning directors' duties both in New Zealand and Australia are as relevant to alternate directors as to any directors. These include the Australian Securities and Investments Commission v Healey4 decision, where the Federal Court of Australia ruled:

"...there is a core, irreducible requirement of directors to be involved in the management of the company and to take all reasonable steps to be in a position to guide and monitor"


"Directors are entitled to delegate to others the preparation of books and accounts and the carrying on of the day-to-day affairs of the company. What each director is expected to do is to take a diligent and intelligent interest in the information available to him or her, to understand that information, and apply an enquiring mind to the responsibilities placed upon him or her".

Chapman Tripp's discussion of this and other key cases – Backsides exposed if noses in, fingers out means hands off, eyes closed – is available here.

Chapman Tripp comments

The risks associated with being an alternate director are relatively high given that he or she will be held equally accountable by the courts and yet it would seem a stretch to expect occasional alternates to have the same familiarity with the company and the issues confronting the company as would a regular director.

Alternates need therefore to be sure that they have all of the information they need to make decisions and need to keep asking questions until they are thoroughly satisfied that they are equipped to make an informed decision.

It is also fair to ask whether technology may have overtaken the need for alternate directors. Skype and video-conferencing technology mean that it may no longer be necessary to be in the physical boardroom to participate in a board meeting.

However, the latest litigation in the long-running James Hardie saga is a reminder that if the relevant documents are circulated in hard copy only and you are not in the room, you should either insist that the matter is deferred until you have seen the relevant documentation or you should abstain from voting.

When the James Hardie board approved a misleading statement to the ASX, two of the directors were participating by telephone and had not seen the text. The NSW Court of Appeal imposed lower civil penalties to reflect the fact that they had not been able to read the document – but only slightly lower.

The Court found that [at paragraph 298] they had breached their duty as a director by failing to ask for a copy of the draft release, or at least failing to abstain from voting to release it, thereby dissociating themselves from the decision.


1 Markwell Bros Pty v CPN Diesels (Qld Pty Ltd) (1982) 7 ACLR 425

2 Trustees of the Orange River Land & Asbestos Co v King (1802) 6 HCG 260

3 Strathmore Group Limited v Fraser & Ors (1991) 5NZCLC 67, 163

4 Australian Securities and Investments Commission v Healey [2011] FCA 717

The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Roger Wallis
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.