Discharge from Liability

The general meeting of shareholders grants or denies discharge from liability for damages for the persons or entities of the company which are under liability, such as members of the board and the managing director. The statement of the discharge from liability may concern only a part of the managers.

Discharge from liability is generally granted for the period of the entire financial period but it is possible to carve out certain matters. After having granted discharge from liability, the general meeting of shareholders may not demand for the company compensation for matters which it had knowledge of when granting discharge. This means that compensation may only be demanded for matters which the general meeting did not possess knowledge of at the time of granting discharge. In practice the board of directors does not give nor does it generally have the possibility to give such information to the general meeting which diminishes essentially the significance of the discharge decision.

The general meeting of shareholders may freely decide on whether or not it grants the discharge of liability. Denial of discharge from liability may often be a mere expression of discontent towards the activities of the board of directors or one of its members. The situation may be such, e.g., when discharge is denied although a damage which could give rise to a compensation claim has not occurred. On the other hand, the company may grant discharge from liability although it would be obvious that the company could bring an action against the persons or entities under liability. For instance, it may better for the company’s reputation not to bring an action against the company’s management than to carry on an action in a public court procedure.