For directors and shareholders
The discharge of directors is the separate vote in which the general meeting rules on the board, after it approves the annual accounts. The Wetboek van vennootschappen en verenigingen (Code of Companies and Associations) attaches conditions to that vote. Where those conditions fail, the discharge is not valid. For a minority shareholder, the same vote settles whether a claim against the board is still open.
When is the discharge valid?
The discharge is valid when the annual accounts do not conceal the true position of the company. Article 5:98, second paragraph, of the Code of Companies and Associations sets that condition for a private limited company. The general meeting votes on it separately, after it approves the annual accounts. An omission or an incorrect statement that conceals the true position therefore leaves the director without cover.
For operations that breach the articles of association or the Code, a second condition applies. In a private limited company those operations must be specifically stated in the notice convening the meeting. In a public limited company, article 7:149, second paragraph, requires the directors or the members of the supervisory board to have expressly placed those breaches on the agenda of the general meeting. The two company forms point to a different document: the convening notice and the agenda.
A discharge afterwards is not an indemnity in advance. Article 2:58 bars the legal person, its subsidiaries and the entities it controls from exonerating or indemnifying a director in advance. Any provision in the articles of association or in an agreement that conflicts with that rule counts as unwritten. An indemnity clause in a service agreement with a director therefore has no effect.
Who can still sue the board after the discharge?
The general meeting itself decides whether the company brings a claim against the members of the board or against the statutory auditor. Article 5:103 states that for a private limited company, article 7:156 for a public limited company. It may appoint one or more agents to carry out that decision.
The minority claim sits beside that company claim. Article 5:104, § 1, gives it, in a private limited company, to shareholders who hold at least 10 % of the number of shares issued on the day the general meeting rules on the discharge. The third paragraph adds a second condition: shareholders with voting rights may bring the claim only if they did not approve the discharge, or approved it invalidly.
In a public limited company the threshold differs. Article 7:157, § 1, requires securities carrying at least 1 % of the votes, or securities representing part of the capital worth at least 1,250,000 euro, measured each time on the day of the decision on the discharge. The same approval condition applies. Article 7:158 obliges the claimants to appoint one special agent unanimously to conduct the proceedings.
The risk of that claim rests personally on the claimants. Where the minority claim is dismissed, articles 5:105 and 7:159 allow the court to order the claimants personally to pay the costs. Where it succeeds, the company repays the sums they advanced. We weigh that choice with you in the procedure for a company dispute and in conflicts after a takeover.
The liability grounds that sit beside the discharge
A director’s liability rests on article 2:56 of the Code of Companies and Associations. The text covers persons who hold or have held actual management powers, so it reaches the former director as well. The test is marginal: only decisions, acts or conduct that fall manifestly outside the margin within which normally prudent and careful directors may reasonably differ give rise to liability.
Within a collegiate board that liability is joint and several. A director who took no part in the fault is released under article 2:56, fourth paragraph, on one condition: the director reports the alleged fault to all other members of the board, and the minutes record that report. A verbal reservation without minutes leaves nothing behind.
Article 2:57 caps liability at 125,000 euro, 250,000 euro, 1 million euro, 3 million euro or 12 million euro, according to the turnover and the balance sheet total over the three financial years before the claim. Paragraph 3, 1°, switches that cap off for a light fault that occurs habitually rather than by accident, for gross fault, for fraudulent intent and for intent to harm. In a fraud file that is the hinge.
The period is five years. Article 2:143, § 1, bars claims against members of the board five years after the operations. Where those operations were deliberately concealed, the period runs only from their discovery. Our preventive advice for shareholders keeps that date in view.
What you can check before the vote
You can inspect the annual accounts before the general meeting. Article 5:97 gives shareholders of a private limited company access, fifteen days before the meeting, to the annual accounts, to the list of shareholders who have not paid up their shares, and to the reports the Code prescribes.
You can also put questions. Articles 5:91 and 7:139 oblige the members of the board to answer questions that relate to the items on the agenda. The text sets two limits itself: the question must relate to an agenda item, and the board may refuse where disclosure could harm the company or conflicts with confidentiality undertakings it has entered into.
Where the answer does not come, the court expert stays available. Article 5:106 lets shareholders with at least 10 % of the shares issued ask the president of the enterprise court, sitting as in summary proceedings, to appoint experts to examine the books, the accounts and the operations of the company organs, where there are indications that the interests of the company are seriously at risk. Article 7:160 opens the same right in a public limited company from 1 % of the votes.
A shareholder who wants to attack the decision itself has little time. Article 2:143, § 4, second paragraph, bars a claim to annul a decision after six months from the day the decision became enforceable against the person who invokes the nullity, or the day that person learned of it. Article 2:44, second paragraph, also denies that right to anyone who voted for the contested decision. We go through those documents with you in a dispute between shareholders and in conflicts after bankruptcy and liquidation.
Frequently asked questions
When is the discharge of directors not valid?
When the annual accounts conceal the true position of the company through an omission or an incorrect statement. Article 5:98, second paragraph, of the Code of Companies and Associations sets that condition for a private limited company. For operations that breach the articles of association or the Code, a second condition applies: those operations must be specifically stated in the notice convening the meeting. In a public limited company, article 7:149, second paragraph, requires them to appear expressly on the agenda.
Does a shareholder lose the claim by voting for the discharge?
Yes, where that shareholder holds voting rights and validly approved the discharge. Article 5:104, § 1, third paragraph, lets shareholders with voting rights bring the minority claim only if they did not approve the discharge, or approved it invalidly. Article 7:157, § 1, sets the same condition in a public limited company. A shareholder who wants to keep the claim open therefore does not vote for the discharge.
What threshold applies to the minority claim in a public limited company?
At least 1 % of the votes, or securities representing part of the capital worth at least 1,250,000 euro. Article 7:157, § 1, second paragraph, measures that holding on the day the general meeting rules on the discharge to be granted to the members of the board. In a private limited company the threshold is 10 % of the number of shares issued, under article 5:104, § 1.
Can a company indemnify a director in advance?
No. Article 2:58 of the Code of Companies and Associations bars the legal person, its subsidiaries and the entities it controls from exonerating or indemnifying a member of a board or a day-to-day manager in advance. Any provision in the articles of association, in an agreement or in a unilateral declaration that conflicts with that rule counts as unwritten.
Who can still sue a director after a bankruptcy?
The trustee in bankruptcy and every prejudiced creditor. Article XX.225 of the Code of Economic Law allows current or former directors to be declared personally liable for the shortfall, where a manifestly gross fault they committed contributed to the bankruptcy. A prejudiced creditor may bring that claim only after giving the trustee notice, and only where the trustee does not act within one month. The wrongful trading claim of article XX.227 falls within the exclusive competence of the trustee.