Einde inhoudsopgave
Directors' liability (IVOR nr. 101) 2017/4.1.3
4.1.3 Comparative and empirical insights
mr. drs. N.T. Pham, datum 09-01-2017
- Datum
09-01-2017
- Auteur
mr. drs. N.T. Pham
- JCDI
JCDI:ADS397605:1
- Vakgebied(en)
Ondernemingsrecht / Rechtspersonenrecht
Voetnoten
Voetnoten
Among others, Klaassen 2008, p. 184-187; Bier 2006, p. 37-48; De Jong 2001, p. 232-239; De Kluiver 1997, p. 373-378; Beckman 1994, p. 113-117.
As one of the few who did, Van Wijk (2011, p. 123-128) made a connection between discharge and the interests of the company.
In a comparative study conducted by Manifest, Unanyants-Jackson (2008) reported that, of the 13 European countries under study, derivative actions were not possible in Luxembourg and the Netherlands. The 13 European countries involved were: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Luxembourg, the Netherlands, Portugal, Spain, Sweden and Switzerland.
Blankenburg 1998, p. 1-41. See also Chapter 3, Figure 2 of this book in which I show a weak increase in the number of findings for directors’ liability.
The Manifest study indicates that in any other European country under study a shareholders’ discharge resolution is similarly based on information provided in the annual report or other documents made available to shareholders and informing themon potential breaches of duties or norms for which a director desires to be discharged (Unanyants-Jackson 2008, p. 8). The scope of the limitation of liability may vary in the different jurisdictions however. For instance, in Sweden and Switzerland, a director may be discharged of wilful misconduct, but not unconditionally. Section 33, Chapter 9 of the Swedish Companies Act requires a discharge to be submitted at each annual general shareholders’ meeting. Moreover, the Act requires the auditor’s report to contain a statement indicating whether members of the board should be granted discharge from liability to the company. Under Swiss law, discharge of wilful misconduct only legally applies to those shareholders who gave their consent to the resolution or who subsequently acquired shares with knowledge of the resolution (Unanyants-Jackson 2008, p. 35). Further, the effect of the discharge is mitigated by excluding persons who participated in the management of the company (including de facto directors) from voting on the discharge resolution, including persons acting as a proxy for another shareholder (p. 36). For a more comprehensive comparative overview, see E. Smerdon (ed.) 2001.
Supreme Court, 20 June 1924, NJ 1924, 1107 (Truffino) and Supreme Court, 17 June 1921, NJ 1921, 737 (Deen v. Perlak).
Abma 2014, p. 217-232.
To explore the research question, I made use of comparative and empirical insights. Although discharge has been subjected to considerable scholarly writing in the Netherlands, most of this scholarship has focused on the legal scope of the instrument,1 while the concept of discharge as a corporate governance instrument has remained relatively unchartered.2 This is, at the very least, remarkable. The Netherlands is a unique jurisdiction where derivative actions are not possible3 and the litigation rate is quite moderate.4 It furthermore differs from other European jurisdictions, as it has adopted a relatively farreaching discharge provision. Compared to other European countries, the Dutch concept of discharge seems relatively unconditional. As long as any litigious action is ‘known’ to the general shareholders’ meeting at the time of discharge, as evidenced by information provided in the financial statements or other information made available to the shareholders’ meeting, a shareholders’ discharge resolution may shield directors from liability claims arising from serious reproachable conduct, including intentional harmful conduct.5 It is important to note that the requirement of ‘known’ action to insulate directors from liability for ‘bad faith’ actions is not codified but was developed in Dutch case law.6
To the extent that one believes, as I do, that directors’ liability legislation has a deterrent value or serves to induce directors to act prudently and thoughtfully, the logic of ‘known’ action as the basis for a discharge from even ‘bad faith’ actions is problematic. First, this practice increases the importance of discharge as a corporate governance instrument.7 Second, the adoption of any such resolution is a hypothetical exercise rather than an actual activity compelling a Dutch court to apply the discharge and exempt a director from liability for ‘bad faith’ actions. Upholding the myth that Dutch courts will insulate directors from personal liability to the company when he or she acts in bad faith adds confusion and complexity. Third and broader, good corporate governance may not well served by finding it acceptable to shield directors from personal liability to a company when they act in bad faith even if the shareholders’ meeting carried knowledge of these bad faith actions.
4.1.3.1 Delaware as a source of inspiration4.1.3.2 Looking at discharge claims empirically using Dutch court cases (2003-2013)