Discharge

Discharge is a term you may have heard, although its meaning is not always clear. Discharge is a resolution of the General Meeting of Shareholders (GMS) approving the management conducted by you and the other directors during a particular period, usually a financial year. The purpose of discharge is to protect you, as a director, against future liability claims relating to your acts as a director during that period.

Granting discharge is an important formal act that generally takes place at the annual General Meeting of Shareholders.

Points to consider when granting discharge

If you are dismissed as a director, obtaining discharge can be particularly important. Although your dismissal ends your relationship with the company, you may still be held liable for decisions and actions taken during your period in office. Obtaining discharge protects you, as a director, against such liability claims brought by the company itself.

There are several points to bear in mind when discharge is granted. Discharge is not an absolute guarantee against liability claims. It offers protection against liability claims by the company itself, but not against claims by third parties. There are also circumstances in which discharge may cease to provide protection.

When discharge may cease to apply

Three situations in which discharge may cease to provide protection

Incorrect or incomplete information

If discharge was granted on the basis of incorrect or incomplete information, it may be declared invalid. It is therefore essential that you and the other directors provide the GMS with complete and accurate information.

Undisclosed matters

If, after discharge has been granted, it becomes apparent that there were undisclosed matters that were not known at the time discharge was granted, the discharge may cease to provide protection.

Unlawful or fraudulent acts

Discharge does not protect against liability for unlawful or fraudulent acts. If, after discharge has been granted, it becomes apparent that such acts occurred, the discharge may cease to provide protection.

Why instruct our corporate lawyers?

Granting discharge is a complex process that must be managed carefully to avoid unwanted surprises. Our corporate lawyers can help ensure that this process runs smoothly and efficiently.

We advise you on the best way to obtain discharge, the potential risks and how you can protect yourself against future liability claims. Whether you are a director seeking protection or a shareholder wishing to hold directors to account, we are here to help. Contact us to discuss how we can assist you in your specific situation.