Share Purchase Agreement: warranties, indemnification and earn-out under Belgian law
Publication · November 13, 2025
The Share Purchase Agreement is the central instrument in any acquisition of a Belgian company. While the general rules of contract law, now codified in Book 5 of the Civil Code, apply on a suppletive basis, they are not sufficient on their own to adequately protect the purchaser. Book 5, which entered into force on 1 January 2023, modernised the common law of contracts, in particular regarding good faith, mistake and non-performance, but provides only a minimal foundation for a share transfer transaction.
Indeed, the general statutory guarantees, such as the warranty against hidden defects or the warranty against eviction applicable to sales, were designed for the sale of tangible goods and are poorly suited to the transfer of shares representing a business. This is why Belgian contractual practice favours a system of detailed contractual representations and warranties, covering the target company's accounting, tax, employment, environmental and contractual situation, combined with a standalone indemnification mechanism negotiated between the parties.
The representations and warranties clause must be drafted precisely, identifying the seller's statements regarding the company's situation at a defined reference date. A breach of a representation does not give rise to automatic termination of the contract, but to a contractually defined indemnification, generally subject to a cap and framed by materiality thresholds (de minimis) and deductibles (baskets), as well as specific contractual limitation periods.
The indemnification mechanism is frequently accompanied by an indemnity for liabilities, whereby the seller undertakes to indemnify the purchaser for any liability arising from facts predating the transfer but revealed afterwards. This guarantee can be secured through an escrow of part of the price, a deferred payment, or a bank guarantee, the terms of which must be clearly aligned with the limitation and notification rules.
The earn-out clause allows part of the purchase price to be indexed to the company's future performance, generally measured over one or more years following completion. Its drafting must carefully anticipate the calculation methodology for performance indicators, the treatment of management decisions capable of influencing those indicators, and dispute resolution mechanisms, so as to limit the risk of subsequent litigation between seller and purchaser.
The interplay between representations and warranties, the indemnification mechanism and the earn-out must be considered holistically, as these tools pursue different objectives: the former cover risks revealed after completion, while the latter aims to share the economic risk linked to the company's future performance. Consistent drafting avoids overlaps or gaps between these mechanisms.
Finally, it should be recalled that these clauses remain subject to the general law of obligations, in particular the requirements of good faith in the performance of contracts and the rules on unfair or unbalanced terms, as derived from Book 5 of the Civil Code and, where applicable, competition law or economic law governing relations between undertakings.
As Belgian contract and company law is constantly evolving, notably since the reform of the law of obligations, it is advisable to have any sale documentation reviewed by legal counsel familiar with the current state of applicable legislation and case law.