4.3.3 Summary

In analysing Delaware’s case law based on section 102(b)(7) DGCL, I discussed how good faith constitutes a condition of the duty of loyalty (paragraph 4.2.1). Moreover, I emphasised in paragraph 4.2.5 that the good faith requirement in section 102(b)(7) DGCL, allowing a director the protections of the exculpatory provision against duty of loyalty claims, involves a director’s subjective good faith. As the Delaware Supreme Court noted in Stone v. Ritter when citing Guttman: ‘a director cannot act loyally towards the corporation unless she acts in the good faith belief that her actions are in the corporation’s best interest.’1

Compared to the logic of directors’ subjective good faith applied in Delaware in accordance with section 102(b)(7) DGCL, the logic applied in the Netherlands in relation to the discharge from directors’ subjective bad faith would seem to be completely opposite. The empirical findings in this research shows however differently. I could not find one single case in which a director was knowingly discharged of ‘subjective bad faith’ or ‘not in good faith’ actions (paragraph 4.3.2.4). The empirical findings would seem to suggest that, when deciding on a director’s discharge claim, Dutch courts implicitly require directors to act at the very least in good faith. This finding stands in stark contrast with the existing legal doctrine on the ‘limited scope of discharge’ [de beperkte reikwijdte van de décharge], suggesting that a director may be discharged of personal liability for ‘subjective bad faith’ actions as long as these litigious actions were ‘known actions’ to a company’s general shareholders’ meeting.2 The empirical findings reveal the problematic nature of the fact that existing doctrine does not explicitly require directors to act in good faith as a precondition for discharge from personal liability to the company. In conjunction with the findings from the legal comparison, it seems that the existing Dutch legal doctrine on the ‘limited scope of discharge’ is at odds with good corporate governance, which encourages directors to act in good faith and in the interest of the company. This contradiction need not exist.

Looking critically at the data in this research, it is important to distinguish between directors’subjective good faith and objective good faith. Objective good faith actions do not amount to a serious reproach: a discharge if invoked in a given case, would not influence court judgment. Serious reproach may however arise even if a director acted in subjective good faith. Discharge then may play a critical role to free a director of liability towards the company. In Ceteco and Altera Pars Media, the assumed discharge provision was judged non-existent and therefore could not free directors of liability for serious reproachable actions towards the company; directors’ subjective good faith was not an issue. I argued in paragraph 4.3.2.4b nonetheless that on the basis of Ceteco and Altera Pars Media, it cannot be excluded that courts may discharge the director concerned of serious reproachable actions performed in subjective good faith. Basing on Ellem v. De Bruin and De Rouw v. Dingemans,126 it is my assumption that discharge of directors’ ‘subjective bad faith’ actions is more controversial and problematic then actions performed not in subjective good faith. In the next paragraphs I will explore the potential of ‘subjective good faith’ as a baseline for the review of discharge claims.