4.5.3.3 Annual discharge and final discharge

In paragraph 4.3.1, I have distinguished annual and final discharge. In my view, as a principle, annual discharge and final discharge should both be subjected to the requirement of directors’ subjective good faith. Empirically, there is no reason why annual discharge and final discharge should – in the absence of exceptional circumstances – be treated differently as regards directors’ subjective bad faith actions (see paragraph 4.3.2). At first sight, the empirical finding would appear to stand in contrast with existing case law. This need not be the case.

When reviewing the casuistry of Ellem Beheer (in which final discharge was the object of review) and De Rouw (in which annual discharge was the object of review), the heated debate in my view, was not whether the director concerned did or did not acted fraudulently. Instead, it was debated that, even if a director acted (or were to act) in subjective bad faith, there may be relevant circumstances that, given the context, could be persuasive enough to nonetheless assign legal effect to the discharge resolution at issue. Compared to De Rouw 2.0, it seems that, in Ellem Beheer 2.0, the Supreme Court put weight on the shareholders’ informed legal act of discharging the director concerned when judging the legal effect of the final discharge. Moreover, it can be argued that despite shareholders’ knowledge of directors’ subjective bad faith, the company is best served to provide a director final discharge as part of a settlement agreement in the attempt to get rid of the director concerned in order to get business back on track (see paragraph 4.5.2). The weight of judicial review concerning the legal effect of the annual discharge in De Rouw 2.0, was put on the company’s interest instead of the director’s interest. The discharge could not be applied to such apparent malicious actions, even though the director/shareholder concerned must have carried the knowledge of these actions. I am inclined to argue that if ‘subjective good faith’ would be adopted as the lens to review discharge claims, there would be more room for courts to consider relevant circumstances in order to reach better motivated decisions to validate discharge even in the face of directors’ intentional harmful acts.