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What is a share purchase agreement? It is the agreement by which a seller sells their shares in a private limited company (BV) to a buyer, containing the price, guarantees, indemnities, and conditions for transfer. In English, this is called a Share Purchase Agreement (SPA). The agreement governs the sale; the actual transfer of the shares takes place afterwards at the notary's office.
The short answer
- What: the agreement for the sale of shares in a private limited company, also known as an SPA.
- Delivery: registered shares are delivered by notarial deed (Art. 2:196 BW).
- Warranties: the seller guarantees the accuracy of information about the company.
- Indemnities: agreements regarding known risks that the seller assumes.
- Beforehand: due diligence by the buyer and a purchase price mechanism in the agreement.
What exactly is a share purchase agreement?
In a share transaction, you do not purchase the individual assets of a company, but rather the shares in the private limited company (BV) that operates the company. With this, the entire business is transferred: assets, contracts, personnel, but also debts and obligations. The share purchase agreement establishes the conditions under which the sale takes place. It is an obligatory agreement: the parties commit to the sale and purchase, after which the transfer is arranged separately.
The sale itself is not subject to any formal requirements, but the transfer of registered shares in a BV must be effected by notarial deed (Art. 2:196 BW). A similar rule applies to a NV (Art. 2:86c BW). In doing so, the notary also checks the blocking provision in the articles of association (Art. 2:195 BW), which may stipulate that co-shareholders must first receive an offer.
Due diligence and information
Before a buyer signs, they usually conduct a due diligence investigation. In doing so, they examine the company's finances, contracts, employment relationships, permits, and legal risks. This investigation serves a legal function: the buyer has a duty to investigate, and the seller has a duty to disclose. If the buyer could have discovered something but failed to do so, it will be more difficult for them to rely on this later.
If it turns out that the seller deliberately concealed something, the buyer may, under certain circumstances, invoke error (Art. 6:228 BW) or breach of contract (Art. 6:74 BW). In practice, parties primarily resolve this through the guarantees and indemnities in the agreement itself, because relying on the law is lengthy and uncertain.
Warranties and indemnities
Warranties are statements by the seller that certain facts are correct: the financial statements present a true and fair view, there are no unknown proceedings pending, and taxes have been paid. If a warranty proves to be incorrect, the buyer is entitled to compensation in accordance with the terms of the contract. Indemnities go a step further: they cover a specific, known risk, such as an ongoing dispute or a tax dispute. The seller then assumes the financial consequences thereof, regardless of whether the risk was known.
Parties often also set a maximum amount (cap), a threshold amount, and a time limit for claims. This ensures the seller knows up to what limit and until what point in time they may be held liable. This balance between buyer protection and certainty for the seller is the core of the negotiation.
The purchase price mechanism
The price is rarely fixed as a simple amount. There are two common mechanisms. With a locked box, the price is determined based 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. Additionally, an earn-out occurs: part of the price is only paid if the company achieves certain results after the transfer. Each mechanism distributes the risk differently, so the choice is not just a matter of calculation.
Practical example
An entrepreneur sells his installation company via a share transaction. During the due diligence, the buyer discovers an ongoing dispute with a supplier. Instead of withdrawing, the parties agree on an indemnification: the seller bears any potential costs of that dispute. The purchase price is fixed via a locked box on the balance sheet from three months prior. When the dispute later turned out to cost 15,000 euros, it had already been stipulated that the seller would bear that amount, so that the buyer would not be held responsible.
Honest recommendation
For the transfer of shares between parties who fully trust each other, involving a small company and a straightforward price, the role of the legal expert is limited, and the notary handles the core of the transfer. However, as soon as guarantees, indemnities, and a variable purchase price are involved, that is where things go wrong in a share transaction if things are not right. A share purchase agreement that incorrectly distributes risks can prove costly for the buyer or seller after the transfer. Therefore, have the guarantees, indemnities, cap, and price mechanism drafted to suit the specific situation, and ensure that the notary handles the transfer and the blocking arrangement correctly.
Want to know more? View the share purchase agreement, read how to drafting a share purchase agreement , and what it costs to have a share purchase agreement drafted .
Frequently Asked Questions
It is the agreement by which a seller sells his shares in a private limited company (BV) to a buyer, also known as a Share Purchase Agreement or SPA. The agreement regulates the price, the guarantees, the indemnities, and the conditions for transfer. The shares are subsequently delivered by notarial deed (Art. 2:196 BW).
Because the law prescribes that registered shares in a BV can only be transferred by notarial deed (Art. 2:196 BW), Article 2:86c BW applies to a NV. In doing so, the notary checks the blocking provision in the articles of association (Art. 2:195 BW) and ensures that the transfer takes place legally.
A guarantee is a statement that certain facts are correct, such as that the financial statements present a true and fair view. If they are incorrect, compensation follows. An indemnity covers a specific, known risk, such as an ongoing dispute, the consequences of which the seller assumes regardless of whether the risk was known.
Due diligence is the book review conducted by the buyer before signing. He investigates finances, contracts, employment relationships, permits, and legal risks. It also has a legal function: 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).
Via a purchase price mechanism. With a locked box, the price is determined on a recent balance sheet date. With completion accounts, the price is adjusted retrospectively to the actual figures on the transfer date. Sometimes an earn-out applies, whereby part of the price is only paid once the company achieves certain results.
Yes. In a share transaction, you purchase the shares in the BV, whereby the entire company is transferred: assets and contracts, but also debts and obligations. That is why due diligence, warranties, and indemnities are so important to know exactly what you are acquiring and who bears which risk.
In a share transaction, you acquire the BV in its entirety via the shares. In an asset-liability transaction, you purchase individual components, such as machinery, inventory, and contracts, and the selling BV continues to exist. The share route is often simpler for continuity but entails a greater risk of unknown liabilities.
