M&A-garânsjes en skeafergoedingen: hoe't risiko wurdt tawiisd yn Nederlânske deals

In a Dutch M&A transaction, your protection as buyer or seller sits almost entirely in the share purchase agreement (SPA): warranties, indemnities, liability caps and escrow decide who pays when something turns out to be wrong after completion. The main exception is a set of mandatory Dutch rules you cannot draft around, such as the notarial deed for transferring shares and the works council’s right to advise.

This article explains how these mechanisms work under Dutch law, which limits are common and what you should check as buyer or seller. For the investigation stage before signing, see our article on due diligence yn Nederlânske M&A-transaksjes.

Which Dutch rules apply regardless of the contract?

Whatever law governs the SPA, Dutch rules apply to the transfer of shares in a Dutch company and to Dutch employees. Check these early, because they affect the timetable.

• Notariële oerdracht. Shares in a B.V. or N.V. pass only by a deed executed before a Dutch civil-law notary (Articles 2:196 and 2:86 of the Dutch Civil Code, BW). Signing the SPA does not transfer ownership, and transfer restrictions in the articles of association must be complied with first.
• Undernimmingsried. Under Article 25 of the Works Councils Act (WOR), the works council (ondernemingsraad) must be asked for advice on a transfer of control at a time when its advice can still influence the decision. If the decision departs from its advice, the works council can appeal to the Enterprise Chamber of the Amsterdam Hof fan Berop.
• Fakbûnen. The SER Merger Code (SER-Fusiegedragsregels) requires notification of the trade unions and the Social and Economic Council (SER) in transactions within its scope.
• Kontrôle fan fúzje. Above the turnover thresholds of the Competition Act (Mededingingswet), the deal must be notified to the Netherlands Authority for Consumers and Markets (ACM) and may not be completed before clearance.
• Ynvestearringsscreening. Acquisitions of vital providers or companies active in sensitive technology must be notified to the Investment Screening Office (Bureau Toetsing Investeringen) under the Vifo Act and may not close before the assessment ends.

In an asset deal, the employees working in the transferred business pass to the buyer automatically on their existing terms (Articles 7:662 and following BW). This transfer of undertaking cannot be excluded by contract.

What does a warranty mean under Dutch law?

A warranty (garantie) is a contractual statement of fact about the target, such as “the annual accounts give a true and fair view”. If a warranty is untrue, the seller is liable for breach of contract under Article 6:74 BW, within the limits the SPA sets.

Dutch law has no separate English-style action for misrepresentation. Besides breach of warranty, a buyer can rely on non-conformity (Article 7:17 BW) and on error (dwaling, Article 6:228 BW), which can lead to annulment of the entire purchase. That is why Dutch SPAs almost always exclude error, annulment and rescission, and make the warranty regime the buyer’s only remedy.

Warranties usually come in three groups:

• Bedriuwsgarânsjes on accounts, contracts, assets, permits, employees and litigation, typically limited in time and amount.
• Belestinggarânsjes on filings and outstanding taxes, with a longer survival period.
• Fundamentele garânsjes on title to the shares, the seller’s authority to sell and the absence of encumbrances, often outside the cap and with a long survival period.

How does the disclosure letter limit the warranties?

The disclosure letter lists exceptions to the warranties; what is fairly disclosed in it cannot be the basis of a claim. Sellers therefore often want the entire data room to count as disclosed, while buyers want only specific, fairly disclosed facts to count.

Knowledge matters under Dutch law. Under Article 7:17(5) BW, a buyer cannot invoke non-conformity of what it knew or could reasonably have known when it signed, and reasonableness and fairness (Article 6:248 BW) give the seller arguments against a buyer who claims for a defect it already knew. If you want to claim for known breaches, the SPA must say so expressly (a sandbagging clause). Sellers usually push for the opposite: an anti-sandbagging clause.

When do you need an indemnity instead of a warranty?

Use an indemnity (vrijwaring) for a specific risk you already know about. The seller then pays the buyer euro for euro if that risk materialises, without the buyer having to prove a breach.

Typical examples are pending litigation, soil contamination, a known payroll tax issue or a pension shortfall. A tax indemnity covers taxes relating to periods before completion, even if they were unknown at signing. The Dutch Tax Administration (Belastingdienst) can generally issue an additional assessment (navordering) up to five years after the end of the tax year, and up to twelve years for income or assets held abroad. Tax indemnities and tax warranties therefore usually run for at least that long, plus a few months to give the buyer time to claim.

How is the seller’s liability limited?

The SPA sets financial and time limits on warranty claims. These limits are negotiated, but the same building blocks appear in almost every deal:

• Hoed: the maximum total liability for business warranties, often a percentage of the purchase price; fundamental warranties and indemnities are often subject to a higher cap or none.
• De minimis: individual claims below an agreed amount do not count.
• Koer: the buyer can claim only when all claims together exceed a threshold. With a tipping basket the seller then pays from the first euro; with a deductible basket only the excess.
• Tiidgrinzen: business warranty claims commonly must be notified within 18 to 24 months after completion, tax claims within the tax assessment periods.
• Knowledge qualifier: “to the seller’s knowledge” limits a warranty to what named persons knew or should have known after reasonable inquiry.

Define clearly when a claim counts as notified and when legal proceedings must follow. Unclear drafting on these points is a frequent source of disputes.

How does an escrow protect the buyer?

An escrow holds part of the purchase price with a third party as security for warranty claims. In Dutch deals this is usually the civil-law notary’s third-party account (kwaliteitsrekening) under Article 25 of the Notaries Act (Wet op het notarisambt), or an escrow agent.

The escrow agreement sets the amount, the term (often 12 to 24 months) and the release conditions. The amount is released automatically at the end of the term, except for the part needed for claims notified in time, which stays in escrow until they are settled or decided. An escrow is especially useful if the seller is an individual or a holding that will distribute the proceeds, or if there is no warranty and indemnity insurance.

Alternatives are a bank guarantee, a retention by the buyer from the purchase price, or deferred payment. An earn-out, part of the price depending on future revenue or EBITDA, also works as security, but it often leads to disputes about how the figures are measured.

When is W&I insurance an alternative?

Warranty and indemnity (W&I) insurance moves the risk of warranty breaches from the seller to an insurer. It is common in private equity deals and auctions, where the seller wants a clean exit with a low cap.

The policy does not cover everything. Known issues found in due diligence, forward-looking statements and certain categories, such as pension underfunding, are usually excluded. Known risks therefore still need a specific indemnity or a price reduction.

Which law and which forum should you choose?

Parties can choose Dutch or English law for the SPA, but the notarial transfer of shares in a Dutch company is always governed by Dutch law. Under a Dutch-law SPA, judges read the contract in light of the Haviltex standard (what the parties could reasonably expect), with more weight on the text in detailed commercial contracts between professional parties.

Disputes can go to the Dutch courts, to the Netherlands Commercial Court in Amsterdam (proceedings in English), or to arbitration, for example under the rules of the Netherlands Arbitration Institute (NAI). Purchase price disputes about completion accounts are often referred to an independent accountant as binding expert.

Wat moatte jo as keaper kontrolearje?

• Are error (dwaling) and rescission excluded, and is the warranty regime then broad enough to cover the risks found in due diligence?
• Does the disclosure letter list specific facts, or does it try to disclose the entire data room?
• Are known risks covered by a specific indemnity rather than a general warranty?
• Do the tax warranties and the tax indemnity run until the end of the assessment period?
• Is there security for your claims: escrow, bank guarantee, retention or W&I insurance?
• Does the SPA say whether you can claim for breaches you knew about before signing?

Wat moatte jo as ferkeaper kontrolearje?

• Is your total liability capped, with a de minimis and a basket?
• Are all warranty claims subject to a clear notification deadline and a deadline to start proceedings?
• Is the disclosure letter complete, with every known issue fairly disclosed?
• Are warranties qualified by knowledge where you cannot verify the facts yourself?
• Are the escrow release conditions and dates objective and automatic?
• Has the works council been asked for advice before you sign?

Technology deals add specific points, such as IP ownership, open-source software, GDPR compliance and change-of-control clauses in customer contracts; see our article on M&A in the tech sector.

What can we do for you with warranties and indemnities?

Us bedriuwsjuristen act for buyers and sellers in share and asset deals, from letter of intent to completion.

• We review or draft the SPA, including the warranty, indemnity and limitation clauses.
• We prepare or review the disclosure letter against the due diligence findings.
• We negotiate caps, baskets, time limits and escrow terms with the other side.
• We coordinate the works council request for advice and the notarial share transfer.
• We assess and notify warranty claims after completion, or defend against them.

Gearfetting

• In Dutch M&A, the SPA allocates the risk; error and rescission are usually excluded.
• Warranties cover general statements of fact; indemnities cover specific known risks euro for euro.
• Caps, baskets, de minimis amounts, time limits and knowledge qualifiers limit the seller’s liability.
• An escrow with the notary, a bank guarantee or W&I insurance makes claims collectible.
• The notarial deed, the works council’s advice and merger or investment screening apply whatever the contract says.

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