Discharge is not bankruptcy proof

The Civil Codes of Curaçao, Sint Maarten and Bonaire do not contain provisions specifically dealing with discharging managing directors from liability. Neither is there conclusive Dutch Caribbean case law available yet.

Managing directors of a limited liability company (NV or BV) can be discharged from their liability towards the company. Managers can be discharged of liability by an express shareholders’ resolution, however the articles of many companies contain a provision stating that approval of the annual accounts by the shareholders’ meeting discharges the managing director from his/her liability towards the company with regards to the performance of his duties during that fiscal year. However, even without any explicit basis in the company’s articles and without an express shareholders’ resolution, it is held in legal literature that when the shareholders (unconditionally) approve the annual accounts, discharge is also given to the managing director thus effectively waiving their internal liability (i.e. towards the company).

Abovementioned discharge granted to managing directors is limited to the facts disclosed to the shareholders’ meeting (as such) in the annual accounts and the annual report or otherwise. Managing directors are not discharged from legal acts unknown to the shareholders’ meeting if those actions are intentionally withheld by the managing director and the shareholders had no reason to suspect such.

This discharge does not release managing directors from their liability for unlawful acts towards third parties, which includes individual shareholders and, in the case of the NV or BV having been declared bankrupt, includes the trustee in bankruptcy claiming a shortfall (Section 2:14 Par. 5 Civil Code).

The Supreme Court, in a Dutch case, held that, as a general rule, a discharge does not release anyone from liability for acts which the shareholders could not reasonably have known (HR 10 January 1997, NJ 1997, 360 re Staleman vs Van de Ven Automobielbedrijf). However, if legal acts which could be harmful to the company were known by the shareholders’ meeting and the managing directors were discharged from liability for those acts, they can invoke this discharge on the grounds of the requirements of good faith.

Karel Frielink
Attorney (Lawyer) / Partner

(21 June 2011)


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