A successful equity transaction requires flawless legal delineation from the very first pre-contractual negotiations to the final post-closing integration. Pre- and post-acquisition disputes typically arise from breach of disclosure, unclear earn-out clauses or fundamental breaches of contractual warranties. A thoughtful Share Purchase Agreement (SPA), anticipating the sweeping recent reforms to the Belgian Civil Code, provides the ultimate tool to mitigate these risks and manage complex liabilities.
The pre-contractual stage and the limits of bargaining freedom
The genesis of any equity transaction is at the pre-contractual stage, a delicate period in which Letters of Intent (Letters of Intent or Term Sheets), Non-Disclosure Agreements (Nondisclosure Agreements), and exclusivity clauses delineate the initial chalk lines. The absolute basic principle at this stage is freedom of contract, but this freedom is increasingly strictly framed by the legislature and case law.
The dynamics of freedom of contract and good faith
According to Article 5.14 of the Civil Code (BW), in principle, each party is free to enter into a contract and choose a co-contractor or not, without having to justify the reasons for that choice. This essential freedom is further enshrined in Article 5.15 BW, which explicitly states that parties are free to initiate, conduct and terminate pre-contractual negotiations. In the context of complex business acquisitions, this freedom is crucial; parties must retain the ability to withdraw if insurmountable risks are uncovered during the due diligence process.
However, this freedom is not absolute. Once parties enter into negotiations with each other, they inevitably enter into each other's legal sphere and must act in accordance with the requirements of good faith. Breaking off negotiations only constitutes a tort (a pre-contractual fault or culpa in contrahendo) when done in a manner that manifestly exceeds the bounds of a normal exercise of bargaining freedom. The ultimate touchstone for the judge is the behavior of a normal, careful person placed in the same concrete circumstances.
Legitimate economic or commercial motives generally justify a cessation of discussions. One might consider a substantially higher offer from a third party, the discovery of a significant tax liability during due diligence, or a sudden, fundamental deterioration in market conditions. However, when negotiations are at an advanced stage - for example, after due diligence has been completed without material findings, bank financing has already been applied for, and the draft SPA has already been worked out in detail and approved by the respective governing bodies - the party that abruptly breaks off talks without transparent justification exposes itself to pre-contractual liability. Moreover, the presence of prior agreements such as an exclusivity agreement creates a heightened expectation pattern, which is more likely to lead a court to conclude that the other party's legitimately aroused trust was erroneously violated.
Damage assessment in aborted negotiations: negative versus positive contract interest
If the court finds that the breakdown of negotiations effectively constitutes fault, the question immediately arises as to the extent of damages to be compensated. Article 5.17 BW codifies the penalties for this pre-contractual liability and creates clarity in a historically highly debated area.
The main rule within Belgian contract law is the compensation of the negative contract interest. This restoration mechanism implies that the injured party must be financially returned to the hypothetical situation in which it would have been had there never been a negotiation, or had the mistake (the wrongful termination) not occurred. In the practice of mergers and acquisitions, this typically includes the useless out-of-pocket costs. These include the significant fees for specialized M&A lawyers, auditors, tax advisors and environmental experts engaged specifically for due diligence and contract editing. Only costs that are causally related to the erroneous termination are eligible for reimbursement; regular internal operating costs are rarely withheld.
Compensation of the positive contract interest goes considerably further. Here, the aggrieved party is placed in the economic situation as if the Share Purchase Agreement had been effectively and validly entered into, which makes compensation for lost profits (lucrum cessans) and includes the expected synergy benefits. The legislator explicitly provided in Article 5.17(2) of the Civil Code that this exceptional remedial mechanism is only possible if the aggrieved party had a legitimate expectation that the contract would be concluded “without any doubt.” Given the inherent complexity, the numerous conditions precedent and the final decision-making power of shareholders in share transactions, the burden of proof for this positive contract interest is particularly heavy and will only be granted in very marginal exceptional cases. Moreover, the harmed party always has a legal duty to mitigate damages, which means that it must take all reasonable measures to minimize the financial impact of the aborted deal.
The pre-contractual disclosure requirement and the dynamics of due diligence
The absolute core of the pre-contractual phase in a share acquisition (“share deal”) is the information asymmetry between buyer and seller. The selling shareholder usually knows the target company inside out, including its latent defects, while the buyer is completely dependent on the information provided to accurately assess the economic value and legal risks.
The tension between the duty to disclose and the duty to investigate
New contract law has explicitly codified information obligations. Article 5.16 BW states that during the pre-contractual negotiations, the parties shall provide each other with the information required by law, good faith and custom, taking into account the capacity of the parties, their reasonable expectations and the object of the contract. However, there is no absolute, all-encompassing duty of disclosure under Belgian law that requires the seller to proactively disclose its entire records. Conceptually, the seller's duty to disclose only begins where the buyer's duty to investigate ends.
A professional buyer, especially when assisted by an arsenal of specialized legal, financial and technical advisors, is expected to conduct a thorough and incisive due diligence. While the buyer has no general duty of verification to check every document provided for its absolute truth, if clear signals or ‘red flags’ emerge during the investigation that indicate irregularities, the duty to dig deeper revives. If a buyer ignores these signals, or deliberately chooses to conduct a very superficial book examination to save time or expense, a subsequent claim for pre-contractual liability or fraud on the seller's part will be fundamentally complicated. Courts judge more harshly buyers who, despite professional guidance, conducted a careless investigation.
Against this is the seller's active duty to speak. This duty activates with respect to all elements that the seller knows, or reasonably should know, are of decisive importance to the buyer as to whether or not to close the transaction, or on fundamentally different financial terms. Intentionally concealing the loss of a crucial supplier, withholding an impending environmental claim, or concealing an impending tax audit, constitutes a flagrant breach of this duty to speak and opens the door to annulment of the contract for breach of will or substantial damages.
Evidence revolution: proving “negative facts” under Book 8
In post-acquisition disputes revolving around the pre-contractual exchange of information, the burden of proof invariably presents one of the largest and most frustrating stumbling blocks for the plaintiff. A buyer who claims that certain crucial financial or commercial information was withheld during due diligence encounters the quasi-impossible task under traditional law of proving a “negative fact” (namely, proving that something did not happen, or that a document was not communicated).
Since the entry into force of Book 8 “Evidence” in the Civil Code, the legislature offers an extremely welcome and pragmatic way out here. Whereas the general standard of proof prescribes that proof must be provided with a “reasonable degree of certainty” (Article 8.5 Civil Code), Article 8.6 Civil Code introduces an exception regime for infinitely negative facts. This article explicitly states that the party who bears the burden of proving an adverse fact may be satisfied with proving the “probability” of that fact.
This lowering of the standard of proof is of capital importance in M&A litigation. If the buyer can prove that it is highly probable that a specific, adverse document was never uploaded to the virtual data room (for example, by submitting data room logs, communication summaries and witness statements from due diligence advisors), the burden of proof de facto shifts to the seller. The seller will then have to prove with positive evidence that the information was indeed made available. Therefore, it is an absolute necessity for sellers to meticulously file data room indexes and attach them to the final acquisition agreement.
The strategic construction of the Share Purchase Agreement (SPA).
After due diligence is completed and the commercial parameters are fixed, the agreements crystallize into the Share Purchase Agreement (SPA). Drafting this complex agreement requires not only extreme precision, but also foresight and a deep understanding of its interaction with mandatory and ancillary contract law.
The preamble as an indispensable interpretive foundation
Although in the perception of many parties the preamble (or the preceding recitals) constitutes a mere formalistic introduction, its importance is increasing in contemporary Belgian acquisition practice. The preamble usually does not contain directly enforceable commitments, but colors the court's interpretation of the entire agreement and defines the contextual intentions of the parties.
In the context of new contract law, the preamble should be used strategically to neutralize subsequent extra-contractual or contractual claims. By explicitly affirming in the preamble that the parties negotiated at length and in a balanced manner, that they were assisted by specialized professionals, that an extensive data room had been made available, and that the buyer was given the opportunity to conduct exhaustive due diligence, one anticipates potential claims. For example, such a detailed situation outline significantly complicates a later invocation of the newly codified doctrine of “qualified prejudice” or abuse of circumstances (Article 5.37 BW), where one party would claim that the other took advantage of its inexperience or weak position. It also provides a powerful dam against the application of the general regulation on illegal clauses (Article 5.52 of the Civil Code), since it shows that the clauses are the result of real and equal negotiations.
Representations and warranties.
The backbone of the contractual risk allocation in an equity transaction is formed by the representations and warranties, better known as the representations and warranties. Since the legal regulation on buy-sell protects the buyer very limitedly (the indemnity for hidden defects in a share deal in principle only covers the shares themselves as a legal asset, and not the underlying assets, liabilities or operational state of the company), these detailed contractual guarantees are absolutely indispensable.
In Belgian legal practice, it is generally accepted that warranties provided in an SPA qualify as obligations of result. This has far-reaching legal consequences: after all, a breach of a guarantee does not necessarily presuppose an attributable “fault” on the part of the seller. The mere objective fact that the guaranteed condition (for example, the absence of pending lawsuits or the correct payment of all taxes) does not correspond to reality is sufficient to trigger the obligation to compensate the buyer. Consequently, the seller cannot free himself by invoking force majeure or ignorance (unless the warranty was explicitly qualified with a knowledge qualifier such as “to the reasonable knowledge of the seller”).
Guarantees in a professional SPA are generally divided into three broad categories, each with its own liability regime:
| Category | Features and examples | Impact on liability limitations |
| Fundamental Warranties. | Relates to the absolute legal substance of the transaction. Examples: the seller holds the undisputed ownership of the shares, the shares are free of liens or encumbrances, and the seller is validly authorized to enter into the transaction. | Generally subject to little or no commercial restrictions (no caps or baskets). Statutes of limitations mostly follow common law (up to 10 years). |
| Business warranties (business/commercial warranties) | Relating to the operational reality and condition of the company. Examples: conformity of financial statements, correct compliance with environmental legislation, absence of significant unforeseen disputes, validity of intellectual property rights. | Subject to very strict and extensive liability limitations, such as de minimis thresholds, baskets, maximum amounts (caps) and short expiration periods (typically 12 to 24 months). |
| Specific indemnities. | Customization for concrete risks already identified during due diligence. Example: a pending dispute with the tax authorities or an ongoing soil remediation procedure whose exact financial impact is not yet known. | Usually explicitly excluded from the general restrictions. Provides for a specific euro-for-euro compensation mechanism once the risk actually materializes, regardless of threshold amounts. |
The liberating effect of information (disclosure)
An important bargaining point for the seller is the so-called disclosure or the discharging effect of the information provided. To prevent the buyer from claiming after the acquisition for things it actually already knew, the seller will require that any information disclosed during the book examination qualifies as an exception to the warranties. In that case, a breach of a representation cannot be claimed if the buyer uses the data room or the formal disclosure letter already knew of the misstatement or underlying risk.
Buyers will counter this by demanding that the liberating effect be strictly limited to information that was not only in the data room, but was also structured, readable and accessed there in a traceable manner. In doing so, one wants to protect the technology of data dumping avoid, with the vendor uploading thousands of unsorted documents in the final hours before signing to cover themselves.
Limitations of liability.
To quantify and limit the seller's post-transaction exposure, each full-fledged SPA contains a complex set of quantitative and temporal constraints, applicable only to the collateral guarantees :
- De minimis: This is a threshold amount per individual claim. Any isolated damages or breaches that fall below this amount are completely ignored and do not count towards the calculation of total damages. This prevents the seller from being incessantly harassed with administrative futilities after closing.
- Basket (The Basket): This is a cumulative damage threshold. Only when all qualifying de minimis-claims together exceed this basket, the buyer can proceed to recovery. There is an important distinction in negotiating practice here: in the case of a tipping basket (or first dollar basket) if exceeded, the buyer can recover the full amount from the first euro. At a deductible basket the threshold functions as an exemption, reimbursing only the amount of damage that exceeds the threshold.
- Cap (Maximum Amount): The absolute financial ceiling of the seller's liability, very often expressed as a percentage of the total purchase price (e.g. 10% to 30% for commercial warranties).
- Due dates: The time frame within which claims must be formally notified (often 1 to 3 years for operational matters, and up to 5 or 7 years for tax and social guarantees, depending on the statute of limitations of the tax authorities). Legal practice shows that the legal wording of this obligation to notify is extremely precarious; failure to comply punctually with the contractual deadline or method of notification may result in an absolute forfeiture of rights for the buyer, resulting in the complete loss of his claim.
The earn-out arrangement
When the buyer and seller cannot agree on the current or future valuation of the business - a phenomenon particularly topical in volatile market conditions - the earn-out clause an elegant commercial bridge. In an earn-out, the fixed purchase price is reduced but coupled with a contingent, deferred payment that depends on the future financial or operating performance of the target company (usually for a period of one to three years after closing). It is often measured against goals such as EBITDA, net sales or achievement of specific licenses or contracts.
Conflicting interests and the incentive to manipulate
Despite their usefulness as dealmakers, earn-outs are unquestionably among the most litigated elements in post-acquisition disputes. The sting lies in the fundamental shift of control. After all, ownership and day-to-day operational management pass to the buyer after closing, while the seller remains completely dependent on the policies and success of the business under the new owner for a significant portion of its proceeds.
Once the ink of the SPA is dry, the buyer theoretically (and often in practice) benefits financially from steering results within the earn-out period to minimize or avoid the additional payment. This creates a huge risk of manipulation, with the buyer:
- Artificially delayed planned large contracts or billings until just after the earn-out period.
- Brings forward substantial, long-term investments or heavy depreciation to reduce EBITDA in the reference period.
- Management fees from the new parent company are passed on to the target company, reducing the profit margin.
- The strategic business model fundamentally changes. For example, the company switches from direct sales (where profits are realized immediately) to a SaaS or leasing model (where revenues are spread over seven years). As a result, revenues fall largely outside the agreed earn-out period.
Contractual protections for the seller
To counter such post-closing opportunism, it is important for the seller to include strict standards of conduct and financial guarantees in the SPA during negotiations.
First, the duration of the earn-out should be limited in time, ideally to a period when the seller himself still retains an active management or advisory role within the company so that he can effectively oversee policy and influence performance. Second, mandatory negative and positive covenants should be included. The buyer must guarantee that the business will continue in line with past normal operations (ordinary course of business consistency), and that the business model will not change materially without a contractual renegotiation of the earn-out parameters. Finally, the SPA requires a crystal clear, mathematical definition of the chosen financial parameters, with explicit reference to the applicable Belgian accounting standards (or IFRS) based on continuity with the past. It is also important to include a mandatory dispute resolution procedure whereby disagreements about the calculation are submitted to a binding decision by an independent financial expert (e.g., an independent auditor) before any legal action can be taken. A contractual prohibition on the buyer unilaterally compensating alleged claims for damages (from warranty violations) (set-off) with the earn-out sum due, moreover, prevents the buyer from holding the earn-out hostage as a means of pressure.
The impact of the new contract law (Book 5) on acquisition contracts
The entry into force of Book 5 “Obligations” of the Civil Code on Jan. 1, 2023 will impact Belgian M&A practice. The new code provides contracting parties with powerful, new remedies that, if not carefully written into the SPA, can totally disrupt the delicate balance of power between buyer and seller.
The danger of legal price reduction (Article 5.97 BW)
One of the most radical innovations is the introduction of the general right to price reduction, enshrined in Article 5.97 of the Civil Code. Before this legislation, this principle existed only in specific areas such as the purchase of consumer goods. Now, the general principle of contract law is that the creditor (the buyer), in the event of partial or defective performance that is insufficiently serious to justify the complete termination of the contract, may claim a proportional price reduction.
What makes this rule particularly dangerous for sellers in equity transactions is that the buyer can not only seek this sanction through the courts, but can also claim it unilateral and extrajudicial may apply via reasoned written notice. An assertive buyer might seize upon an alleged breach of a relatively minor warranty (e.g., a missing environmental permit for an outbuilding) to unilaterally and proportionately reduce the payment of an outstanding purchase price or earn-out, thereby preserving the contract but depriving the seller of income.
To nip this significant risk in the bud, integrating a robust and exhaustive ‘sole remedy clause in the SPA more urgent than ever. Such a clause explicitly and exclusively stipulates that, in case of breaches of the acquisition agreement or the warranties, the buyer can only invoke the contractually provided compensation mechanisms (subject to the agreed caps and baskets). The clause expressly excludes the application of all common law remedies, in particular statutory price reduction (Art. 5.97 BW), extrajudicial unilateral dissolution (Art. 5.90 BW) and annulment based on incidental lack of will. Without such a clause, the contractual balance of the SPA is virtually worthless.
Anticipatory remedies: the exceptio timoris (Article 5.239 BW)
A second significant innovation in Book 5 is the statutory codification of the exceptio timoris, or the anticipatory exception of non-performance, as defined in Article 5.239 of the Civil Code. Whereas previously one had to wait for the other party to actually default, this article offers the possibility of preventive action.
If between the time of signing (signing) and the effective share transfer (closing) - or in the period before the payment of a deferred purchase price (such as a vendor loan or earn-out) - has legitimate, objective reasons to fear that the seller will fail to perform a material obligation, the buyer may anticipatively suspend its own obligations (such as payment of the price). Suppose the buyer discovers shortly before closing that the target company is heavily violating data protection law and risks huge fines, it can refuse to pay the price via the exceptio timoris until additional assurances are provided. Again, contractual fine-tuning in the SPA is crucial; parties must contractually frame or exclude the terms of application of such exceptions to prevent transactions from being stranded last-minute on the basis of subjective presumptions.
The revolution of Book 6: The abolition of quasi-immunity of auxiliaries
With the entry into force of Book 6 “Extracontractual Liability” of the Civil Code on Jan. 1, 2025, the legislature has created an absolute paradigm shift that is changing liability law, with implications for M&A practice.
Since the Supreme Court's famous 1973 Stevedores ruling, directors, employees, independent consultants and subcontractors (the so-called “auxiliary persons” of a company) enjoyed the protective quasi-immunity of the executing agent. This meant that if they made a mistake in the performance of a contractual obligation of their company, they could not be held personally and directly extra-contractually liable by the co-contractor unless their mistake also constituted a criminal offense. In equity transactions, this meant that a frustrated buyer, harmed by inaccurate financial information, could only address the selling company. If that company had become an empty shell (SPV) in the meantime, the buyer was missing out.
The new Book 6 eliminates this quasi-immunity. This means that the buyer now has the ability to sue directly not only the selling entity, but also the individual directors, CFO, or outside M&A advisors extra-contractually for their personal part in providing false or misleading information during the due diligence process, or for errors in the execution of the SPA.
Although the legislature has provided for certain protections - auxiliary persons can in principle invoke the contractual liability limitations (such as caps and baskets) from the main contract, as well as on mandatory labor law and corporate law ceilings - the risk of direct, personal liability for the director has increased exponentially. Therefore, within the context of an acquisition, it has become an absolute obligation for sellers and their management teams to negotiate watertight hold-harmless clauses (indemnities), to enter into contracts that explicitly exclude personal liability whenever possible, and to thoroughly optimize Director's Liability Insurance (D&O) policy coverage before entering into a transaction.
New rules for personal securities under Book 9 (2026)
Since Jan. 1, 2026, Book 9 “Collateral” (more specifically, Title 1: Personal Collateral) of the Civil Code has been in effect. Complex, capital-intensive acquisitions invariably make use of an arsenal of personal securities. One thinks of the classic surety bond, the comfort letter or the autonomous guarantee, for example when the parent company solidly guarantees the payment obligations of the acquiring operating company (in a vendor loan), or when the beneficial owner personally vouches for the indemnification obligations of a selling holding company.
For the first time in Belgian history, the new Book 9 provides a comprehensive, modern and legal framework for these instruments, in particular for the independent or autonomous guarantee (first demand guarantee), which was previously tolerated purely on the basis of practice and case law. Also, Book 9 redrafts and tightens the rules regarding traditional surety, including stringent formalities regarding the creditor's notice and information obligations to the surety. SPAs and related acquisition documentation containing future payment guarantees, holdback mechanisms or subordinated loans must now be tested against this new regime. Any carelessness in drafting risks the future unenforceability or invalidity of the posted security in a post-closing dispute.
Settling post-acquisition disputes: claims, wills and procedures
When, despite all the detailed contractual protections, an acquisition does get derailed after closing, the buyer and seller often find themselves diametrically opposed in complex, protracted litigation. The survival chances of such claims depend on the legal foundations on which one bases the claim.
The issue of multiple sellers: joint and several liability and in solidum
A critical but often overlooked issue when drafting an SPA is the allocation of liability when the selling party consists of multiple individuals (for example, a combination of institutional investors, private equity and individual founders or management members).
Belgian common law, enshrined in Article 5.159 BW, is based on the fundamental principle of the divisibility of debts. Specifically, this means that a buyer, if it can demonstrate a successful claim for damages, can only sue each individual seller for its proportionate share of the damages (usually proportional to the percentage of shares sold). If one of the minority shareholders has since proved insolvent, the buyer bears the entire credit risk and cannot recover this share from the other, more intermediate sellers.
To eliminate this significant risk, the buyer must contract in the SPA the passive joint and several liability (Article 5.160 BW) or a in solidum obligation (Article 5.168 BW) between all sellers. This creates the opportunity for the buyer to go directly to any individual seller of their choice for the integral amount of damages, usually the party with the most liquidity (the deep pocket). Sellers with small minority stakes will understandably fight tooth and nail against this absolute joint and several liability during negotiations, as their risk exposure is out of all proportion to the limited acquisition price they received. A workable compromise often involves depositing a substantial amount in an escrow account that serves as an initial, exclusive buffer for any claims, or by capping the joint and several liability per individual vendor.
The last resort: defects of will and fraud (Article 5.35 BW)
When the contractual remedy clauses in the SPA do not provide relief - for example, because an extremely strict cap far from covering the damage amount, because a de minimis has not been met, or because an expiration date has been exceeded - desperate buyers often turn to the heavy artillery of the common-law will ‘fraud’ (Article 5.35 BW). The rationale behind this is the time-honored adage fraus omnia corrumpit (cheating destroys everything): after all, successfully proven cheating generally breaks all contractual liability limitations in the SPA.
To speak of fraud, it is required that a party was misled by cunning artifice that the co-contractor deliberately and intentionally employed. The law explicitly states that mere silence or wrongful withholding of information (which was to be communicated pursuant to the obligation to provide information) can also constitute such an artifice. However, case law applies a distinction with far-reaching consequences :
- Headshot: The subterfuges committed were so essential and decisive that without this deception, the buyer would have pertinently purchased the shares never would have purchased. The penalty for this is draconian: the relative nullity of the entire acquisition agreement (Article 5.33 BW), coupled with an absolute, retroactive effect (ex tunc). This implies full restitution: the shares must go back to the seller, and the purchase price back to the buyer. In the complex practice of corporate acquisitions, where the target company has often restructured, merged or changed operationally beyond recognition over the course of months or years, this implementation is in practice a legal and economic nightmare.
- Incidental cheating: The situation in which the buyer would probably have concluded the transaction without the artifice, but not on the same terms (for example, merely at a significantly lower purchase price). The sanction here does not lead to the destructive nullity of the transaction, but opens the way to additional, proportional damages or an adjustment of the price.
However, the burden of proof to prove intentional deception (the intentional element) is particularly heavy and is critically evaluated by courts, especially when the buyer is a professional entity that has been assisted by experienced M&A advisors and has completed lengthy due diligence. For those who were knowingly negligent in their book examinations, invoking deception usually offers no way out.
Procedural choices: arbitration versus regular court
Given the overwhelming technical complexity, inherent legal uncertainty, substantial expert fees, and shaky burden of proof in takeover disputes, it is no surprise that an overwhelming majority of these disputes ultimately end in an out-of-court settlement agreement (amicable agreement). The systematic construction of a robust, documentary-based file that strictly complies with contractual formal notice requirements is often the essential lever to force the seller to the negotiating table.
However, if the knife is at the throat and a settlement proves impossible, the choice of dispute resolution authority - predetermined in the forum clause of the SPA - determines the path. In specialized M&A practice, arbitration (e.g., through the CEPANI Rules) very often enjoys absolute preference over traditional corporate courts. The undeniable advantages of arbitration are the absolute confidentiality of the procedure, the speed of decision-making, the fact that arbitral awards are in principle binding without the possibility of protracted appeals, and above all the possibility of appointing highly specialized arbitrators with in-depth financial or technical expertise.
However, this superior efficiency is offset by a formidable financial disadvantage: arbitration is exceptionally expensive. Proceedings before an arbitral tribunal mean that plaintiffs and defendants not only have to pay their respective lawyers, but also have to advance the entire fees of the three-member arbitral panel and the administrative commissions of the arbitration institute. Consequently, the financial threshold for initiating proceedings is considerably higher than in traditional court proceedings, which in itself acts as an effective filter to nip purely intimidating claims in the bud.
Frequently Asked Questions (FAQ)
What is the impact of Book 6 of the Civil Code on M&A transactions and directors' liability?
As of Jan. 1, 2025, Book 6 abolishes the historical quasi-immunity of auxiliary persons. Specifically, this means that directors, employees and outside counsel who make a mistake in the preparation or execution of a contract (such as due diligence or a share deal) can now be held directly, personally and extra-contractually liable by the buyer. This requires an urgent update of indemnity clauses, contractual liability limitations and Director's Liability Insurance (D&O) policy coverage.
Why is a sole remedy clause absolutely necessary in a Share Purchase Agreement (SPA)?
A sole remedy clause excludes the application of general legal sanctions and stipulates that, in the event of a breach of contract, the buyer can rely exclusively on the specific, contractually agreed compensation mechanisms in the SPA. Since January 1, 2023, the Civil Code (Article 5.97 Civil Code) allows the buyer to unilaterally and extrajudicially implement a proportional price reduction in the event of the slightest breach of contract. Without a strict sole remedy clause, the seller risks that the buyer will reduce outstanding purchase prices or earn-outs on its own, regardless of the negotiated caps and baskets.
How is legal due diligence different from the seller's duty of disclosure?
Within Belgian law, both parties bear an active duty. The seller has a speaking duty (duty of disclosure) for all information that he knows or should reasonably know to be of essential, decisive importance for the buyer's decision. At the same time, the buyer has a compelling duty to investigate. If the buyer is assisted by experienced professionals, the court will rule that he possessed the means to detect irregularities himself. It is only when the seller deliberately conceals information and intentionally manipulates the data room that the violation of the duty of disclosure prevails over a superficial investigation by the buyer.
Conclusion
Pre- and post-acquisition disputes are increasingly rooted in subtle, often unnoticed imbalances within the Share Purchase Agreement. These disputes are escalating rapidly, from inadequately hedged earn-out mechanisms and unsubstantiated evidentiary issues around data room disclosure, to the lack of protection against the unilateral price reduction rules (Book 5) and the elimination of directors' and M&A advisors' liability immunity (Book 6).
A successful, uncontested transaction therefore requires contractual precision and a deep understanding of both business realities and the hidden legal pitfalls embedded in contract law. The timely, thoughtful and rigorous documentation of intentions, outcome commitments and liability limitations constitutes the only legitimate and sufficient mitigation strategy to protect your business assets.
Dutch 
English