In principle, there are two types of discharge of the Board of Directors:
- Each member of the Executive Board is discharged individually or
- the entire Executive Board is discharged jointly.
If there is no provision to this effect in the Articles of Association, the General Meeting decides on the type of discharge procedure. It is also possible to limit the discharge in terms of time (period of office) or subject matter (business of the Executive Board areas).
If the discharge has been carried out in the association for many years without a basis in the articles of association, you can continue to use the procedure. In such a case, a so-called “association custom” has developed, which may be practiced legitimately. The discharge of the board of directors releases the board members from liability claims. However, this only applies to points about which the members were informed in advance.
The actions of the Executive Board are not approved: What now?
First of all, there is no legal requirement that stipulates that the actions of the Management Board must be approved. The association's articles of association are always decisive. If the actions of the entire board or individual members are not approved, the general meeting disapproves of the association's management and cash management.
In addition, the members retain the option of subsequently asserting claims for damages against the members of the Board of Directors. However, there is also the option to waive this in the event of a refusal to grant discharge. If the waiver is not provided, the subsequent board must review the circumstances and, if necessary, take legal action against the previous board.
In principle, the general meeting decides whether or not to approve the actions of the entire Executive Board or individual members. Unless the articles of association provide a clearly formulated direction.
Note: If a vote is taken on the discharge of individual members of the Executive Board, these persons may not participate in the vote.
Board members who have not been discharged can, of course, defend themselves against this and take legal action to have the discharge approved. If the court approves the discharge, the Board member will receive a corresponding judgment, which is legally superior to the decision made at the General Meeting.
Despite exoneration, personal liability does not end
At a general meeting, the Board of Directors publishes a report on the activities of the previous year. The auditors then report on their findings. This is usually followed by a motion to discharge the Board of Directors so that the members can vote on it. Board members often assume that personal liability no longer applies once the actions of the Board have been approved. There are two prerequisites for this:
- Cash audit: Board members must provide the auditors with clear and complete books and records. In the event of deliberate withholding of information or a lack of clarity, personal liability applies despite the resolution to discharge the auditors.
- Completeness: The annual report on the association must be correct, particularly in financial terms. If the members are misled in this respect, the Board of Directors is not exempt from liability even if the actions of the Board of Directors are approved.
A practical example: During the general meeting, a member accuses the board of not having properly credited the tournament income to the association. The 1st chairman rejects the accusations and convinces the other members, whereupon the actions of the board are approved. In retrospect, it turns out that the accusations were justified. Because the accusation was discussed at the general meeting and the actions of the board were subsequently approved, there is no private claim for damages against the board. The situation is different if the issue is not raised at the general meeting.
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