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Directors' liability (IVOR nr. 101) 2017/4.5.3.2
4.5.3.2 Recognising the historical roots of Dutch discharge
mr. drs. N.T. Pham, datum 09-01-2017
- Datum
09-01-2017
- Auteur
mr. drs. N.T. Pham
- JCDI
JCDI:ADS396133:1
- Vakgebied(en)
Ondernemingsrecht / Rechtspersonenrecht
Voetnoten
Voetnoten
It must be noted that I have not conducted a thorough historical analysis. Some general historical reflections may however provide better understanding of the Dutch concept of discharge.
Bier 2006, p. 39-40.
The link between the approval of the accounts and the discharge of directors’ liability – providing the performance of management duties were discernible in the approved documents – was established in the Supreme Court decision in Deen v. Perlak. To date, pursuant to art. 2:101/210(3) DCC, the adoption of the financial statements by the general shareholders’ meeting does not imply a discharge of liability of the directors or supervisory directors. A separate discharge resolution is required.
With reference to the legal decisions in Forumbank and Doetinchemse IJzergieterij, De Jongh describes the change in view of the legal relationship between the actors within the company as being purely contractual to regarding the company as a legal order in which the powers over the company are divided between the actors of the company (2014, p. 341). According to De Jongh (p. 340), the institutional view of the company already found support in the Supreme Court’s decision in 1964 (Mante).
Article 2:129/239(5) DCC.
De Jongh 2014, p. 338 (explaining how the rise of the institutional theory of the company is closely related to the development of the corporate interest).
De Jongh 2014, p. 297-298.
The findings in this research prompt us to critically reconsider the existing doctrine on discharge based on the informed legal act of waiver. I have argued that the basis of the existing doctrine is problematic. Such a claim may be further supported by recognising the historical context of the Dutch concept of discharge.1
Historically, directors were considered agents of the company.2 The managerial duties of these agents were contractually constrained by mandate. In carrying out the mandate, the agent concerned was obliged to account for his actions to his principal. These accounts served to inform the principal of the performance of the agent under the mandate. The informed principal then could decide to approve the accounts. In approving the accounts, the principal assumed the agent’s proper performance of his management duties and the agent concerned may assume he was freed of personal liability to the company. At least, the agent may assume that the principal had waived his right to sue the agent.3
Directors are no longer considered to be agents constrained by contractual obligations. The directors’ scope of activities have broadened drastically and their authority has become institutionalised.4 Dutch directors under the articles of association primarily derive their powers from company law. As of 1 January 2013, the Dutch Civil Code prescribes that the directors shall discharge their duties in the interests of the company and its enterprises.5 These legal developments may be seen as favouring a further institutional theory of the company in which pluralism of interests is prevalent.6 In view of the codification of art. 2:129/239(5) DCC, it is assumed that, within the spectrum of the pluralism of interests, the company may have an interest in its own continuity. The argument in favour of the continuity of the company as a common corporate interest may lie in the growth or scale of the company’s enterprise and the interests of employees and (to a certain extent) creditors with regard to the continuity of the company and its enterprise.7
Against the backdrop of the development of the company as an independent institution with its plural interests, it may seem more appropriate to further institutionalise discharge and to improve it as a ‘corporate’ instrument. As I have suggested, such an improvement should involve a director’s subjective good faith as a requirement. Admittedly, a discharge, as it is now being perceived in legal doctrine, may have legal effect only between the director concerned and the company (the contracting parties), yet this legal fact does not exclude the interests that other (third) parties may have in the company’s decision to provide discharge to a director. As a contracting partner acting within the context of the corporate legal order, the company should maintain cognizance of its own interests, including the interests of the employees and creditors of the company, and the company’s independent interest with regard to the discharge resolution. At least, such a discharge should not be detrimental to the company’s interests. The requirement of a director’s good faith may be used for this purpose.