Abi Bassett is quite right to point out that the chair (or any other individual councillor) has no power to make decisions. Only the council or its committees meeting formally with proper notice can make a decision (or a council officer if delegated by the council).
The six month restriction is commonly in standing orders, but not in legislation. It is possible for the council to agree to override that standing order, but it does need a formal decision to do so.
It is not up to the council or any of its members to decide whether a councillor has an interest in a matter that would require them to withdraw from consideration of that matter. It is entirely down to the individual councillor to make their own decision. If is permissible for other councillors to remind an inexperienced councillor of the restrictions but this should be done in a constructive way and does not have any binding force.
On the specific question, there is a difference between knowing someone and being a friend of someone. If a councillor makes a decision that could bring financial benefit to family or friends, then that would be wrong. Merely appointing someone who is known to the councillor is not wrong. Where the line is drawn is up to the individual councillor.
The chair is not entitled to automatically substitute for another councillor unless the original council decision appointing members to the panel stipulated that.