Introduction
The share purchase agreement (SPA) sets out the conditions under which the shares in a company pass from the seller to the buyer. Beyond the price, the agreement is chiefly concerned with the allocation of risk: who bears which risk after completion, which warranties are enforceable, and what happens if the company turns out to be in a different position from the one presented during the negotiations? The agreement settles these questions in advance, with a view to the dispute that will hopefully never arise.
The structure of the agreement
The structure of a share purchase agreement follows the logic of the transaction itself. It first records who the parties are and what is being bought; then how the price is determined; next what must happen before, during and after completion; then what the seller stands behind and how liability is capped and allocated; and finally the clauses that protect the relationship after the transfer, together with the general provisions. In that order, each part builds on the previous one. The full structure may look as follows:
- Preamble: title, parties and recitals
- Definitions and interpretation
- Sale and purchase of the shares
- Purchase price
- Price mechanism
- Conditions precedent
- Obligations before completion
- Completion (closing)
- Obligations after completion
- Warranties
- Disclosure letter
- Limitation of liability
- Indemnities
- Non-compete clause
- Penalty clause
- Confidentiality
- Governing law and jurisdiction
- Schedules
Preamble: title, parties and recitals
The agreement opens with the title, the parties and the recitals. The parties named are the buyer and the seller, and sometimes a guarantor who stands surety for performance. The recitals describe what the parties intend and why; they create no independent obligations, but in a dispute they are used to interpret the intention of the agreement in accordance with the Haviltex standard.
Example recitals +
The undersigned: (1) [Seller] ("Seller");
and (2) [Buyer] ("Buyer");
whereas the Seller holds all issued shares in [Company] and wishes to sell them, and the Buyer wishes to buy them, have agreed as follows:
Where the seller is a holding company with limited recourse, it is in the buyer's interest to have a guarantor co-sign; for that party behind it, staying outside the agreement is the more favourable position.
Definitions and interpretation
Every capitalised term is a defined term. A single definition can determine the outcome of a claim. The interpretation clause sets out the rules of construction and the order of precedence of the documents.
Example definitions +
"Loss" means financial loss within the meaning of Section 6:96 DCC;
"Warranties" means the statements of the Seller set out in Schedule 1;
"Seller's Knowledge" means the awareness of [the directors] after due enquiry.
A broad definition of "Loss" (including consequential loss) is buyer-friendly; the seller limits it to direct loss. A definition of "Knowledge" that presupposes enquiry likewise works in the buyer's favour.
Sale and purchase of the shares
The subject matter of the transaction: the seller sells the shares to the buyer, free of rights of pledge, attachments and other limited rights. This clause defines precisely which shares are transferred and that they pass unencumbered. Where the transaction concerns assets rather than shares, further provisions are added on the transfer of employees (Section 7:662 DCC), VAT on the transfer of a totality of assets (Section 37d of the Turnover Tax Act (Wet OB)) and the treatment of assets that are not transferred or are shared.
Example clause +
The Seller hereby sells the Shares to the Buyer, who buys them, free of limited rights and attachments. The Shares comprise all issued and fully paid-up shares in the capital of the Company.
For the buyer, an express confirmation that the shares are fully paid up and unencumbered is important; the seller prefers to limit its statements to what it can genuinely oversee.
Purchase price
The purchase price fixes the amount the buyer pays, in which currency, and at what moment and in what manner payment is made. Payment is often made into the client account of the civil-law notary, who only pays it on after completion.
Example clause +
The Purchase Price amounts to EUR [amount] and is paid by the Buyer on the Completion Date by transfer into the client account of the Notary, who pays the Seller from it after Completion.
Immediate payment of the full price is seller-friendly; the buyer prefers to negotiate a deferred payment or a portion held in escrow, as leverage for later claims.
Price mechanism
The price mechanism determines how the purchase price is set and, after completion, adjusted where necessary. There are three main forms: completion accounts (settlement on the actual balance sheet at completion), locked box (a fixed price on a historic balance sheet, with a leakage ban) and an earn-out (a deferred payment dependent on future performance). The choice decides who bears the risk between signing and settlement.
Variants: completion accounts, locked box or earn-out
Completion accounts
| Reference date | The completion date; the balance sheet is drawn up and agreed after closing. |
|---|---|
| Adjustment | The price is adjusted euro-for-euro for actual working capital and net debt against the agreed targets. |
| Risk until closing | With the buyer: it acquires the actual position at completion. |
| Dispute resolution | An independent chartered accountant decides on disputed items on a binding basis. |
| When suitable | Volatile working capital, or where the parties do not share a recent reliable balance sheet. |
Locked box
| Reference date | A historic balance-sheet date before signing; no post-completion settlement. |
|---|---|
| Adjustment | None; the price is fixed, increased by an agreed interest/return to completion. |
| Risk until closing | With the buyer from the locked-box date; the seller warrants that no Leakage occurs. |
| Dispute resolution | Limited to a claim for Leakage, recoverable euro-for-euro. |
| When suitable | A recent, reliable balance sheet; the seller wants certainty and a clean exit. |
Earn-out
| Reference date | One or more future measurement periods after completion. |
|---|---|
| Adjustment | A deferred payment dependent on pre-defined KPIs (revenue, EBITDA, milestones). |
| Risk until closing | Shared: the seller participates in future performance. |
| Dispute resolution | Fix the measurement definitions and consistent accounting policies up front; accountant as binding expert. |
| When suitable | To bridge a valuation gap, or where the seller stays involved in the business. |
Example clauses
Example clause +
The provisional Purchase Price is EUR [amount]. Within [30] days of Completion the Buyer draws up the Completion Balance Sheet as at the Completion Date; the difference between actual Working Capital and the Target Working Capital, and between actual Net Debt and the Target, is settled euro-for-euro against the Purchase Price. Disputed items are determined bindingly by [chartered accountant].
The Purchase Price is fixed and based on the Locked Box balance sheet as at [date], increased by [percentage] per annum to the Completion Date. The Seller warrants that no Leakage has occurred since that date; Leakage is reimbursed to the Buyer euro-for-euro on first demand. 'Leakage' covers [dividends, payments to or for the benefit of related parties, waivers, extraordinary bonuses], save for [Permitted Leakage].
The Buyer pays an additional amount of up to EUR [amount] if [EBITDA] over the period [year] is at least EUR [threshold], calculated on the consistent policies set out in Schedule [x]. During the Earn-out period the Buyer conducts the business [in the ordinary course / without deliberately frustrating the earn-out]. Disputes over the calculation are determined bindingly by [chartered accountant].
Points to watch
- Earn-outs are a source of disputes. Fix the measurement definitions, consistent policies and the buyer's degree of discretion; provide protection against deliberately frustrating the earn-out.
- A locked box stands or falls by the Leakage definition. Delimit Permitted Leakage sharply and attach an appropriate interest/return.
- Working-capital target. A wrongly chosen target quietly shifts value between the parties; support it with a normalised average.
Conditions precedent
Between signing and completion, conditions may apply that must first be satisfied: a merger clearance, the consent of a financier or landlord, or a board or shareholders' resolution. The agreement governs who uses its efforts to have those conditions satisfied and what happens if this is not achieved before the long-stop date.
Example clause +
The obligation to complete is suspended until [the required merger clearance] has been obtained. If this condition is not satisfied by [the long-stop date], either Party may rescind this Agreement without being liable in damages.
A buyer negotiates broad conditions that give it room to withdraw from the purchase; the seller keeps the conditions limited and objective, so as to increase deal certainty.
Obligations before completion
Where there is time between signing and completion, conduct-of-business obligations apply to the seller: the business is continued in the ordinary course and no far-reaching decisions are taken without the buyer's consent. In this way the buyer receives what it saw at signing.
Example clause +
Until the Completion Date, the Seller conducts the business in the ordinary course and, without the Buyer's prior written consent, does not [make investments above EUR ..., enter into loans, dismiss key personnel].
A broad list of acts requiring consent is buyer-friendly; the seller keeps that list short so as to be free to run the business up to completion.
Completion (closing)
On the completion date all actions are carried out simultaneously and unconditionally. The transfer of shares in a private limited company (BV) or public limited company (NV) is effected by notarial deed. A completion checklist prevents one party from performing without the other doing likewise.
Example clause +
On the Completion Date, the Parties carry out simultaneously before the Notary: (i) the execution of the deed of transfer;
(ii) payment of the Purchase Price;
and (iii) the resignation and appointment of directors.
For both parties a firm, simultaneous completion checklist is favourable: payment and transfer are inseparably linked, so that no one performs without a counter-performance.
Obligations after completion
After completion, obligations continue to exist: cooperation with the settlement, the transfer of ongoing contracts and the correction of "wrong pockets", assets or liabilities that have mistakenly remained with the wrong party.
Example clause +
If, after Completion, an asset or a liability belonging to the business rests with the wrong Party, it is, on first request and for no consideration, transferred to or assumed by the other Party respectively.
The buyer values broad after-care and cooperation obligations; the seller limits these in time and scope, so as not to remain tied to the business indefinitely.
Warranties
Warranties are statements by the seller about the company as at the completion date: about the shares, the annual accounts, tax, contracts, personnel and more. They allocate the risk of what the buyer cannot verify itself. If a warranty proves untrue, the buyer has a contractual claim in damages, generally within the limits of the liability regime. Absent an express arrangement, Section 7:17 of the Dutch Civil Code (DCC) applies as the default: the buyer cannot rely on a defect it knew of or ought to have known.
Variants: the same clause, a different balance
Buyer-friendly
| Scope | Fundamental and extensive operational warranties across the whole business. |
|---|---|
| Knowledge qualifier | None or minimal; where used, with a duty of enquiry ('after due enquiry'). |
| Sandbagging (Section 7:17 DCC) | Pro-sandbagging: the statutory anti-sandbagging default is contracted out, so the buyer can claim even for matters it knew or ought to have known. |
| Effect of disclosure | Only facts specifically and concretely set out in the Disclosure Letter bar a claim. |
| De minimis / basket / cap | Low de minimis and basket; cap up to (nearly) the full purchase price. |
| Survival | Long: general 24-36 months, tax linked to the reassessment period. |
| Security | Escrow (part of the price retained) and/or a guarantee. |
Balanced
| Scope | Fundamental warranties hard; key operational warranties qualified. |
|---|---|
| Knowledge qualifier | On designated warranties ('so far as known to [the directors] after due enquiry'); core warranties stay hard. |
| Sandbagging (Section 7:17 DCC) | Expressly regulated, or the statutory default applies - a deliberate choice, not left open. |
| Effect of disclosure | Fair disclosure: reasonably apparent facts bar the related claim. |
| De minimis / basket / cap | De minimis ~0.1%, basket ~1%, cap ~10-25% of the purchase price. |
| Survival | General 18-24 months; tax and pensions longer. |
| Security | Partly escrow, or W&I insurance taking over (part of) the recourse. |
Seller-friendly
| Scope | Thin and fundamental (title, capacity, shares); operational warranties limited. |
|---|---|
| Knowledge qualifier | Broad: many warranties 'so far as known', without a duty of enquiry. |
| Sandbagging (Section 7:17 DCC) | Anti-sandbagging retained or reinforced: the buyer cannot rely on what it knew or ought to have known. |
| Effect of disclosure | Broad: everything in the data room is deemed disclosed. |
| De minimis / basket / cap | High de minimis and basket; low cap (e.g. 5-10% of the price). |
| Survival | Short: 12 months, with limited exceptions. |
| Security | W&I insurance as primary recourse - a clean exit, no escrow. |
The full catalogue of warranties
Example clause +
- The seller is entitled to sell and transfer and holds the Shares free from limited rights, attachments and third-party claims.
- Entering into and performing the agreement does not conflict with law, the articles of association or any agreement binding the seller or the company.
- The Shares are validly issued and fully paid and constitute the entire issued capital.
- There are no options, convertible rights or other claims to the issue or transfer of shares.
- The Annual Accounts have been prepared in accordance with the applicable reporting rules and give a true and fair view of assets and results.
- Since the balance-sheet date the business has been conducted in the ordinary course without any material adverse change.
- The Company has no liabilities other than those appearing from the Annual Accounts or the ordinary course of business since.
- All returns have been filed on time and correctly and tax due has been paid or provided for.
- There are no disputes or adjustments with the tax authorities, and there are no deviating tax rulings unknown to the buyer.
- A current list of employees, terms of employment and pending disputes has been provided.
- There are no commitments beyond the usual terms; pension obligations are correctly funded and accounted for.
- The Company owns or holds valid licences for the IP it uses in the business.
- So far as known, the business does not infringe third-party rights and its rights are not being infringed.
- The material contracts have been provided, are in force and are being performed.
- No counterparty has terminated or announced termination, and the transaction does not trigger a change-of-control right in a material contract.
- The Company holds the required permits and complies with the laws and regulations applicable to it.
- There are no judicial, arbitral or administrative proceedings pending or, so far as known, threatened, other than as set out in the Disclosure Letter.
- The Company has valid title to or a right of use over the assets and real property it uses, free from undisclosed encumbrances.
- The business is insured in the usual manner; premiums have been paid and there are no undisclosed claims.
- So far as known, the business complies with applicable environmental law and there is no contamination giving rise to a clean-up obligation.
- The Company and its officers have not breached any applicable anti-corruption or sanctions rules.
Points to watch
- Regulate sandbagging expressly (Section 7:17 DCC). The statutory default is anti-sandbagging: the buyer cannot rely on what it knew or ought to have known. To reverse this, it must be contracted out.
- Disclosure can hollow out the warranties. A clause deeming the whole data room 'disclosed' guts much of the catalogue; limit it to fair disclosure.
- Tax and pension warranties should carry a longer survival period, linked to the tax reassessment period.
- Align warranties, indemnities and the liability cap. A specific indemnity should sit outside the cap and the de minimis.
Disclosure letter
The counterpart to the warranties is the disclosure letter: a statement of facts that are excepted from the warranties. What is specifically disclosed in it can no longer be invoked by the buyer as a breach afterwards. The disclosure letter thus directly determines the scope of the warranties.
Example clause +
The facts set out in the Disclosure Letter are deemed to have been disclosed to the Buyer and exclude any claim for breach of the Warranties to which they relate.
A seller prefers broad, generally worded disclosures; the buyer requires each disclosure to be specific and verifiable and not to disappear into generalities.
Limitation of liability
The liability regime limits the seller's exposure for breaches of warranty: in amount (de minimis, basket and cap), in time (survival period) and by exception (fraud, wilful misconduct, fundamental warranties). It is the keystone of the risk allocation and interacts with the warranties and the indemnities.
Variants: the same regime, a different balance
Buyer-friendly
| De minimis | Low (e.g. 0.05-0.1% of the price); small claims count. |
|---|---|
| Basket | Low threshold; once exceeded, full recovery from the first euro (tipping basket). |
| Cap | High: up to (nearly) the full price, certainly for fundamental and tax warranties. |
| Survival | Long: general 24-36 months, tax linked to the reassessment period. |
| Exceptions | Fraud, wilful misconduct, fundamental warranties and specific indemnities sit outside all limits. |
Balanced
| De minimis | ~0.1% of the price. |
|---|---|
| Basket | ~1% of the price; as tipping or as a deductible - a deliberate choice. |
| Cap | General warranties ~10-25%; fundamental and tax warranties up to 100%. |
| Survival | General 18-24 months; tax and pensions longer. |
| Exceptions | Fraud/wilful misconduct and fundamental warranties outside the cap; indemnities regulated separately. |
Seller-friendly
| De minimis | High; only substantial claims count. |
|---|---|
| Basket | High and as a deductible: only the excess above the threshold is recoverable. |
| Cap | Low (e.g. 5-10%), or recourse runs primarily through W&I insurance. |
| Survival | Short: 12 months, with limited exceptions. |
| Exceptions | Limited; only fraud is carved out. |
Example clause
Example clause +
The Seller's liability for breaches of the Warranties is limited to [10-25]% of the Purchase Price;
for the Fundamental Warranties and the Tax Warranties a cap of 100% of the Purchase Price applies. A claim is admissible only if the relevant breach exceeds EUR [de minimis] and the aggregate of qualifying claims exceeds EUR [basket][, in which case only the excess is recoverable]. Claims lapse [18] months after Completion;
Tax Warranties and Fundamental Warranties lapse after [longer period]. The limits do not apply in the event of fraud or wilful misconduct by the Seller, nor to the indemnities in article [x].
Points to watch
- Tipping versus deductible basket. With a tipping basket everything is recoverable once exceeded; with a deductible only the excess. The difference is substantial in euros - state it expressly.
- Cap per warranty type. Fundamental and tax warranties should carry a higher cap than general warranties.
- Fraud carve-out. Fraud and wilful misconduct should sit outside every limit; state whether this includes constructive fraud.
- Interaction with indemnities. Ensure specific indemnities expressly sit outside the cap, de minimis and basket, or they will run empty.
Indemnities
An indemnity covers a named risk in full: where a warranty gives the buyer damages after proof of breach and loss, an indemnity reimburses a specific risk euro-for-euro, usually outside the general liability limits. Indemnities are used for risks that surface in due diligence: a pending tax dispute, an environmental issue, litigation.
Variants: the same clause, a different balance
Buyer-friendly
| Cover | Full, euro-for-euro reimbursement of all loss from the named risk, including costs. |
|---|---|
| Relation to caps | Outside the cap, de minimis and basket of the warranty regime. |
| Duration | Tied to the risk itself (e.g. the tax reassessment period), not the short warranty period. |
| Conduct of the claim | With the buyer, subject to a duty to inform the seller. |
| Security | Part of the price in escrow for the named risk. |
Balanced
| Cover | Euro-for-euro for the named risks; consequential loss and fines clearly regulated. |
|---|---|
| Relation to caps | Outside the warranty thresholds, but with a separate (sub-)cap per indemnity. |
| Duration | Matched to the risk, with a longstop date. |
| Conduct of the claim | Conduct of claims: the buyer handles it, the seller is involved and may co-decide on settlement. |
| Security | Escrow for the largest risk; the rest uninsured. |
Seller-friendly
| Cover | Only concretely named and quantified risks; no residual category. |
|---|---|
| Relation to caps | Counting under the general cap, or with a low sub-cap. |
| Duration | Short and with a hard longstop date. |
| Conduct of the claim | With the seller, or the buyer may not settle without consent. |
| Security | No escrow; recourse limited, if any, via W&I or a guarantee. |
Example clauses
Example clause +
The Seller shall indemnify the Buyer in full against all Loss, costs and fines arising from [the tax dispute with the tax authorities regarding ...], without application of the de minimis, basket and cap in article [x]. This indemnity lapses [six months after the relevant assessment becomes final].
If the Buyer receives a third-party claim that may fall under an indemnity, it informs the Seller within [period]. The Buyer conducts the defence, keeps the Seller informed and does not settle without the Seller's prior written consent, not to be unreasonably withheld.
Points to watch
- Conditions precedent can block an indemnity claim. Draft the condition and the longstop carefully - this was the very issue in the case law referred to under Section 6:23 DCC.
- Regulate conduct of claims. Without agreement on who conducts the defence and who may settle, paralysis sets in just when it matters.
- Interaction of warranty/indemnity/cap. Ensure the indemnity expressly sits outside the warranty limits, or it will run empty against the cap or basket.
Non-compete clause
The buyer pays for the goodwill of the business and wishes to prevent the seller from eroding it after the transfer. A non-compete clause, supplemented by a non-solicitation and non-poaching clause, prohibits the seller from competing again. Scope and duration must be proportionate to the interest to be protected, failing which the court will limit or set aside the clause.
Example clause +
For [24] months after Completion, the Seller shall not, directly or indirectly, compete with the business within [the Netherlands], nor approach employees or customers of the Company.
A long duration, a wide territory and binding the seller personally are buyer-friendly; a short, narrowly defined restriction that binds only the selling entity is seller-friendly.
Penalty clause
Breach of core clauses, such as the non-compete or confidentiality clause, is often sanctioned by a contractual penalty (Sections 6:91 to 6:94 DCC), both as an incentive and as liquidated damages. The court may reduce a penalty where it leads to an excessive result; a contractual exclusion of reduction does not always hold.
Example clause +
In the event of a breach of [the non-compete clause], the Party in breach forfeits an immediately payable penalty of EUR [amount] per breach and EUR [amount] for each day the breach continues.
A high penalty "without prejudice to the right to full compensation of damages" is buyer-friendly; a capped penalty that serves as the sole remedy is seller-friendly.
Confidentiality
The parties keep the content of the transaction and the information exchanged confidential, and coordinate press releases and external communications with one another. In a deal involving employees or customers, the timing of the announcement is a separate point of attention.
Example clause +
The Parties keep the existence and content of this Agreement confidential and make no announcement about it without the prior written consent of the other Party, save where required by law.
Broad confidentiality with a penalty is important for the seller who wishes to sell confidentially; the buyer wants room to communicate the acquisition internally and to financiers.
Governing law and jurisdiction
Finally, the engine room: which law governs the agreement and which forum resolves disputes. For Dutch parties, Dutch law is the obvious choice; the choice between the state courts and arbitration is a deliberate one.
Example clause +
This Agreement is governed by Dutch law. Disputes are submitted at first instance exclusively to the competent court in [Amsterdam].
For a party seeking speed and confidentiality, arbitration is attractive; for a party mindful of costs and not fearing a public judgment, the state courts.
Schedules
The heart of the agreement often lies in the schedules: the list of warranties, the disclosure letter and the annual accounts to which the warranties refer. In an asset transaction, a list of employees and a step plan are added. The schedules deserve the same attention as the main text, because the scope of the warranties is directly determined by them.
Example schedules +
Schedule 1: Warranties · Schedule 2: Disclosure Letter · Schedule 3: Annual Accounts and Completion Balance Sheet · Schedule 4: Draft deed of transfer.
What does this mean in a dispute after completion?
Most disputes in acquisitions arise after completion: warranty claims, price adjustments and earn-out disputes. An agreement with clear definitions, tight deadlines and a clear dispute-resolution mechanism limits that risk. If it does result in proceedings, the agreement touches on the field of commercial litigation and, where not all shareholders support the transaction, on shareholder disputes.