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Drafting a share purchase agreement involves carefully establishing the price, guarantees, indemnities, and delivery terms after the due diligence, so that it is clear who bears which risk. The agreement governs the sale; the actual transfer of the shares subsequently takes place by means of a notarial deed (Art. 2:196 BW). What exactly should be included is listed below.
The short answer
- Parties and object: who sells which shares in which BV.
- Purchase price and mechanism: locked box, completion accounts, or an earn-out.
- Warranties: statements by the seller regarding the company, with cap and threshold.
- Indemnities: known risks assumed by the seller.
- Terms of delivery: suspensive conditions, blocking arrangement, and notarial transfer.
Drafting a share purchase agreement begins with due diligence
Before you can finalize the drafting of a share purchase agreement, the buyer must know what he is buying. In a share transaction, the entire BV is transferred, including debts and obligations. The due diligence, the examination of finances, contracts, personnel, and legal risks, therefore directly determines the content of the agreement. What emerges during that investigation is translated into guarantees or indemnities. The buyer has a duty to investigate and the seller a duty to disclose, which is linked to a possible claim based on error (Article 6:228 of the Dutch Civil Code).
Purchase price and payment terms
Do not just fix the amount, but also the mechanism. With a locked box, the price is determined on a recent balance sheet date, and the buyer bears the economic risk from that moment on. With completion accounts, the price is adjusted retrospectively to the actual figures on the transfer date. An earn-out links part of the price to future results. With an earn-out, also regulate how those results are measured and who has influence over them, as this often leads to disputes afterwards.
Also consider collateral. Part of the purchase price can be temporarily deposited in escrow to provide coverage should a claim under the guarantees follow later.
Warranties, indemnities and liability
The warranties constitute the largest part of the agreement. The seller declares that certain facts are correct: the annual accounts present a true and fair view, there are no unknown proceedings pending, taxes and pension contributions have been paid, and the most important contracts and permits are valid. If a warranty proves to be incorrect, the buyer is entitled to compensation in accordance with the agreement (in line with Article 6:74 of the Dutch Civil Code regarding breach of contract).
Indemnities cover specific, known risks, such as an ongoing dispute or a tax dispute. Establish the limits in this regard: a cap (maximum amount), a threshold below which claims do not count, and a claims period. This limitation is important for the seller, because without a cap, their liability continues. For the buyer, a realistic cap and a reasonable period constitute the protection. This balance is the core of the negotiation.
Delivery, terms and blocking policy
The agreement governs the sale, but the transfer of registered shares in a BV can only be effected by notarial deed (Art. 2:196 BW, for a NV Art. 2:86c BW). Therefore, specify the conditions under which the transfer takes place. Suspensive conditions often apply: approval by a bank, consent from a major customer, or compliance with the blocking provision in the articles of association (Art. 2:195 BW). This provision may stipulate that co-shareholders must first receive an offer. Also regulate the date of transfer and the moment at which risk and control pass.
Competition and other provisions
Include a non-compete and non-solicitation clause to prevent the seller from immediately starting a competing business or taking clients with them. Furthermore, regulate what happens to the seller's current account, whether they remain involved for a period prior to the transfer, and which information remains confidential. These are the provisions that ensure the transition proceeds smoothly in practice.
Practical example
An entrepreneur sells his wholesale business via a share transaction. Due diligence reveals that a large portion of the revenue comes from a single customer. The parties resolve this with an earn-out: 20 percent of the purchase price is only paid if that customer remains for two years. The guarantees are capped at 30 percent of the purchase price and have a claims period of eighteen months. Because the measurement method for the earn-out was precisely defined, no dispute arose later regarding whether the objective had been achieved.
Honest recommendation
For a very simple transfer between parties who trust each other, involving a small business and a fixed price, a concise agreement and a notary will suffice, and you do not necessarily need an extensive customization process. As soon as guarantees, indemnities, an earn-out, or a substantial price are involved, that is the moment to have it done properly. After all, the guarantees, the cap, and the price mechanism determine who bears the cost of setbacks after the transfer. Have these components drafted to measure, coordinate the suspensive conditions and the blocking arrangement with the notary, and unambiguously record the earn-out measurement.
Want to know more? View the share purchase agreement, read what a share purchase agreement is and what it costs to have a share purchase agreement drafted .
Frequently Asked Questions
The parties and the shares, the purchase price with the chosen mechanism, the seller's guarantees with cap and threshold, the indemnities for known risks, the delivery terms and the blocking arrangement, and a non-compete clause. The transfer itself subsequently takes place by notarial deed (Art. 2:196 BW).
During due diligence. In a share transaction, the entire private limited company (BV) is transferred, including debts. What the due diligence reveals is translated into guarantees or indemnities. The buyer has a duty to investigate and the seller a duty to disclose, which is related to error (Article 6:228 of the Dutch Civil Code).
With a locked box, the price is fixed on a recent balance sheet date, and the buyer bears the risk from that moment on. With completion accounts, the price is adjusted retrospectively to reflect actual figures. An earn-out links part of the price to future results. Precisely define the measurement method for an earn-out.
A cap limits the maximum amount for which the seller is liable, a threshold prevents claims for small amounts, and a claims period limits the period during which the buyer can claim. Without these limits, the seller's liability continues. The balance between protection and certainty is at the heart of the negotiation.
Conditions that must be met before the transfer takes place, such as approval from a bank, consent from a major customer, or compliance with the blocking arrangement (Art. 2:195 BW). If they are not fulfilled, the transfer does not proceed. They protect parties against a transfer under unjustified circumstances.
Often, yes. With escrow, a portion of the purchase price is temporarily deposited with a third party. If a guarantee later proves to be incorrect, the claim is covered without the buyer having to pursue the seller. It provides security, especially with higher risks or a less well-known counterparty.
Yes, that is common practice. A non-compete and non-solicitation clause prevents the seller from immediately starting a competing business or taking customers with them after the sale. Without such a clause, the value of what the buyer has purchased can diminish rapidly. However, the scope and duration must be reasonable.
