Discharge (décharge): what it means for directors

When the general meeting grants discharge (décharge), it declares that the company will not hold a director liable for their management over a certain period. This release only applies towards the company itself. It also only covers what appears from the annual accounts or was otherwise disclosed to the meeting (Supreme Court (Hoge Raad) 10 January 1997, ECLI:NL:HR:1997:ZC2243).

Creditors, the Dutch Tax Administration (Belastingdienst) and a bankruptcy trustee (curator) are not bound by discharge. Below you can read who grants discharge, what it covers and what directors and shareholders should look out for.

Table of contents

What exactly is discharge?

Discharge is the release that the legal entity grants to a director or supervisory director for the way they performed their duties. With it, the company gives up its right to hold them liable for improper performance of duties under Article 2:9 of the Dutch Civil Code (Burgerlijk Wetboek, DCC).

The word décharge does not appear in the law. Book 2 of the Dutch Civil Code speaks of release (kwijting). Two forms are common: the annual discharge after the annual accounts have been adopted, and final discharge (finale décharge) when a director leaves, covering their entire term in office.

Who grants discharge?

In a private limited company (bv) and a public limited company (nv), this is the general meeting, unless the articles of association name another body. In an association (vereniging), the general members’ meeting decides. In a foundation (stichting), the articles of association determine who takes the decision, often the supervisory board.

Supervisory directors receive separate discharge for their supervision. Record the decision in the minutes or in a written shareholders’ resolution, stating the period and the persons it covers.

Is adopting the annual accounts also discharge?

No. Under Article 2:210 DCC (bv) and Article 2:101 DCC (nv), adopting the annual accounts does not serve as a release. A separate resolution is needed for that, usually as a separate agenda item.

There is an exception for the bv. If all shareholders are also directors, the signing of the annual accounts by all directors and supervisory directors counts as adoption, provided the other persons entitled to attend meetings have agreed to this. In that case the adoption does serve as a release, unless the articles of association exclude this route (Article 2:210 DCC).

What is and is not covered by discharge?

Discharge only covers what appears from the annual accounts or was otherwise disclosed to the general meeting before it decided (Supreme Court 10 January 1997, Staleman/Van de Ven). Anything the director withheld falls outside it.

What matters is what the meeting knew as a body, not what one shareholder knew outside the meeting. To decide this, the Amsterdam Court of Appeal (Gerechtshof Amsterdam) looked at the documents and minutes that were available to the meeting (22 October 2019, ECLI:NL:GHAMS:2019:3820). The resolution also only covers the persons and the period it names.

Does discharge protect against creditors and the bankruptcy trustee?

No. Discharge is an internal arrangement between the company and the director. It does not affect liability towards third parties.

A creditor can still hold a director liable for a wrongful act (onrechtmatige daad) (Article 6:162 DCC).
In a bankruptcy, the trustee can bring a claim for manifestly improper management (kennelijk onbehoorlijk bestuur) (Article 2:248 DCC).
The Dutch Tax Administration can hold a director liable for certain tax debts after a notification of inability to pay (melding betalingsonmacht) (Article 36 of the Collection of State Taxes Act 1990 (Invorderingswet 1990)).

You can read more about these routes in our article on directors’ liability.

Is a director entitled to discharge?

According to the prevailing view, no. The general meeting may refuse discharge or limit it to certain matters. A refusal does not yet mean that the company holds the director liable. The company’s claim is usually time-barred after five years (Article 3:310 DCC).

When a director leaves, final discharge is often included in a settlement agreement (vaststellingsovereenkomst). Have the general meeting confirm that release. If only the current board signs, a dispute may later arise about whether the company is bound. See also our article on the dismissal of a statutory director.

Can a discharge resolution be challenged?

Yes. A resolution that conflicts with reasonableness and fairness (redelijkheid en billijkheid) can be annulled (Articles 2:8 and 2:15 DCC). Anyone who wants it annulled must bring a claim within one year. The period starts when the interested party took note of the resolution or was informed of it (Article 2:15 DCC).

An example is a discharge that the director voted for himself, as majority shareholder, while withholding information. The outcome depends heavily on the facts and on what was discussed in the meeting.

What should you look out for as a director?

Is discharge a separate item on the notice of the meeting, apart from the adoption of the annual accounts?
Are losses, transactions with related parties and pending disputes mentioned in the documents or the minutes?
Does the resolution state your name and the period it covers?
When you left, did the general meeting grant final discharge?

What should you look out for as a shareholder?

Have you read the annual accounts and the management report, and asked your questions in the meeting?
Is an investigation or dispute ongoing? Then consider withholding or limiting discharge.
Are your questions and the answers recorded in the minutes? They will later determine the scope.
If you have doubts about a resolution that has been adopted, keep the one-year period for annulment in mind.

What can we do for you with discharge?

Draft or review a discharge resolution, notice of meeting or minutes.
Assess whether a particular act or transaction is covered by an earlier discharge.
Negotiate a final release in a settlement agreement when a director leaves.
Claim annulment of a discharge resolution, or defend against such a claim.
Assist a director facing a liability claim from the company or the bankruptcy trustee.

In summary

Discharge is a release by the company for the management carried out; the word does not appear in the law.
Adopting the annual accounts is not discharge (Articles 2:210 and 2:101 DCC), except in a bv where all shareholders are directors.
Discharge only covers what the meeting knew (Supreme Court 10 January 1997, Staleman/Van de Ven).
Creditors, the bankruptcy trustee and the Dutch Tax Administration are not bound by it.
A discharge resolution can be challenged within one year (Article 2:15 DCC).

Frequently asked questions

What does granting discharge mean?

It means that the company declares it will not hold the board liable for improper performance of duties over a certain period. The general meeting takes the decision, usually after adopting the annual accounts.

What happens if discharge is not granted?

Then the company can in principle still hold the director liable, within the five-year limitation period (Article 3:310 DCC). A refusal does not mean that the company will actually bring a claim.

Does discharge also apply to an association or foundation?

Yes. In an association, the general members’ meeting grants discharge. In a foundation, the body named in the articles of association does so. The limits are the same: discharge only covers what was known, and only applies towards the legal entity.