Dutch vs US M&A transactions: the key legal differences

Introduction
The Netherlands and the United States have maintained an active M&A relationship for decades, with Dutch and American parties regularly meeting across the negotiating table. That relationship brings a practical challenge, however: the two legal systems and market practices diverge significantly on a number of crucial points. This article discusses the principal differences between Dutch and US M&A law, from the legal structure of the target to the damages framework.

1. The legal structure of the target
An acquisition in the Netherlands is typically structured as a share purchase in a besloten vennootschap (B.V.), the Dutch equivalent of a US private corporation or LLC. Unlike in the US, where a share transfer can be completed without a notarial requirement, transferring shares in a B.V. always requires a notarial deed executed before a Dutch civil law notary. This is a matter of mandatory law that cannot be contracted around, and it requires timely planning in the transaction timeline.

The B.V.s articles of association also deserve attention. They may contain transfer restrictions, pre-emption rights for co-shareholders, or approval requirements that affect the structure and timeline of the acquisition.

2. Locked box or closing accounts
In the Netherlands, the locked box method is the prevailing market practice. The purchase price is set on the basis of a historical balance sheet (the so-called locked box date or effective date) and remains unchanged in principle thereafter. The economic interest in the target passes to the buyer as of the effective date. To protect against unauthorised value extraction in the period between the effective date and completion, such as dividends or intragroup transactions, the seller provides leakage indemnities. The scope of the leakage concept is therefore a central negotiation point and deserves close attention during due diligence and negotiations.

US practice has traditionally favoured closing accounts. Under this approach, the purchase price is estimated at signing and adjusted after completion based on actual figures, such as working capital, net debt and cash position. This true-up process is, in practice, a common source of disputes.

For US parties acquiring a Dutch target, it is important to understand that the locked box method is not a concession by the seller but standard market practice. Due diligence should therefore focus heavily on the historical financial statements underlying the locked box balance sheet.

3. Disclosure
Under Dutch market practice, the seller typically discloses against the warranties by referring to the full contents of the data room. The buyer is deemed to have knowledge of all material made available, even if he has not personally read every document. This standard does have a limit: the information must have been properly disclosed, such that a reasonably informed buyer can determine the nature and extent of the relevant risk from it.

In the US, this works fundamentally differently. The seller must specifically identify exceptions to each warranty in disclosure schedules attached to the SPA. The burden of proof rests entirely with the seller, who must explicitly state what is not covered. This places the buyer in a stronger information position but makes the process considerably more labour-intensive for the seller.

Connected to the disclosure question is the debate around sandbagging, the question of whether a buyer may still bring a claim after completion for something he already knew about before completion. A pro-sandbagging clause allows this. In Dutch practice, such a clause has virtually disappeared: the principle of reasonableness and fairness works against a buyer claiming for something he already knew about at signing. In the US, the clause was long more common, but its popularity is steadily declining there too.

4. Warranties and indemnities
Caveat emptor versus a duty to disclose
One of the most fundamental systemic differences concerns the relationship between the seller's statutory and contractual disclosure obligations. As a starting point, US law follows the principle of caveat emptor: the seller has no general duty to speak and the buyer must be vigilant himself. Representations and warranties play a dual role here: they allocate risk and force the seller to state explicitly, per warranty, what is not covered, via the disclosure schedules to the SPA. The seller's statutory right to remain silent is thereby reversed in contractual practice into a detailed disclosure obligation specified per warranty.

Dutch law takes a different approach. Pre-contractual reasonableness and fairness give rise to a duty to disclose: the seller must proactively provide relevant information. If the seller breaches this duty, the buyer may rely on mistake or breach of contract. Warranties in a Dutch SPA therefore serve less as a tool to extract information and more as a means of contractual risk allocation. In practice, this duty to disclose is generally satisfied by the seller making the full data room available, with the buyer bearing the risk of not having read it, an approach that stands in contrast to the US schedules methodology, where the burden of proof rests entirely with the seller.

Exclusion of the Dutch Civil Code
A characteristic feature of the Dutch share transaction is the systematic exclusion of the statutory remedies under the Dutch Civil Code. Rescission, price reduction and claims for non-conformity or mistake are almost universally excluded, meaning the SPA itself forms the sole basis for claims. This places high demands on the warranty and indemnity provisions, since there is no statutory safety net. If mistake or fraud can nonetheless be established, the contractual limitations fall away entirely. In the US, such an active exclusion is not required, since the indemnification framework functions as a standalone mechanism by its nature.

Specific indemnities
Both Dutch and US purchase agreements include specific indemnities for identified risks, such as tax disputes, environmental liabilities or pending proceedings. In Dutch practice, however, they play a particularly prominent role, partly as a result of the combination of Civil Code exclusion and broad data room disclosure. Precisely because the buyer can no longer rely on the statutory safety net, and known risks disclosed via the data room often no longer give rise to a warranty claim, specific indemnities provide a direct and reliable basis for recourse. To bring a claim, the buyer need only show that the indemnified risk has materialised, not that a warranty has been breached. Moreover, general liability limitations, caps, thresholds and basket amounts are generally not applied to specific indemnities, or only in a diluted form. Negotiating specific indemnities is therefore a critical part of any Dutch M&A transaction.

Liability caps and survival period
Market practice diverges on liability caps. In the Netherlands, the general cap typically ranges between 10 and 50 per cent of the purchase price, depending on deal size and risk profile; fundamental warranties are usually subject to a higher or uncapped liability. In the US, the widespread adoption of warranty and indemnity (W&I) insurance has significantly changed the picture. In insured deals, now the majority of US private M&A transactions, the contractual cap is reduced to the excess under the policy. The difference in cap levels primarily reflects the greater maturity of the W&I insurance market in the US.

The survival period of warranties also differs. In the Netherlands, 18 to 24 months is the norm for general warranties. Research by the American Bar Association shows that a 12-month period is more common in the US, considerably shorter than Dutch practice.

5. Contract interpretation: Haviltex versus plain meaning rule
In the Netherlands, an agreement is interpreted according to the Haviltex test: the court examines what the parties could reasonably have expected of each other. This test looks beyond the literal contract text; pre-contractual statements and correspondence are taken into account, even if they are not included in the contract. This makes the recitals in a Dutch SPA more relevant than in the US, since they outline the parties intentions and thereby colour the interpretation. Linked to this is the principle of reasonableness and fairness, which has broad application under Dutch law: it can supplement obligations the parties did not expressly record and, in exceptional cases, can set aside contractual provisions.

In the US, this is fundamentally different. In particular in the state of New York, which serves as the preferred choice of law for the SPA in international transactions, the plain meaning rule applies: if the contract text is clear, the court looks no further. There is no room for pre-contractual correspondence or negotiation history, and the duty of good faith has a narrower scope there than reasonableness and fairness under Dutch law, creating no independent supplementary obligations. Connected to this is the parol evidence rule: for a fully integrated agreement, no evidence of additional arrangements outside the text may be introduced, a principle contractually anchored through an entire agreement clause. Dutch law has no equivalent. The Dutch Supreme Court confirmed in the Lundiform/Mexx judgment that such a clause does not automatically prevent pre-contractual statements from being taken into account in interpretation. Because the court does not intervene to correct the record, US lawyers document the legal relationship as comprehensively as possible, which explains why US SPAs are considerably longer than their Dutch equivalents.

6. Damages and remedies
As explained in section 4, Dutch SPAs systematically exclude the statutory remedies under the Dutch Civil Code, leaving the SPA itself as the sole basis for warranty claims. That exclusion has a direct consequence for the threshold of liability: a warranty in a Dutch SPA operates as a strict obligation as to result. Once a warranty proves to be factually incorrect, the seller is liable — no requirement of fault or other basis of attributability applies. To that extent, Dutch SPA practice diverges from the general rule under Dutch contract law, which treats attributability as the default threshold, and converges instead with the US concept of strict liability. The real difference between the two systems therefore lies not in the liability threshold but in the contractual treatment of types of loss. US SPAs expressly identify and limit which categories of damages are recoverable: consequential damages, incidental damages and lost profits are routinely capped or excluded, and punitive damages are excluded almost without exception. Dutch practice is less prescriptive in this respect. Whether indirect losses and lost profits are recoverable under a Dutch SPA is primarily a matter for negotiation; damages are assessed in principle on the basis of the positive contractual interest. This point deserves explicit attention during negotiations, and Dutch SPAs are increasingly addressing the categorisation of recoverable loss specifically.

Comparison table: Netherlands versus US at a glance

Frequently asked questions
Is a notarial deed required to sell a Dutch B.V.?
Yes. Unlike in the US, a notarial deed executed before a Dutch civil law notary is mandatory for the transfer of shares in a B.V. and this cannot be contracted around.

What is the difference between a locked box and closing accounts?
Under a locked box, the purchase price is set on the basis of a historical balance sheet and remains unchanged in principle, with leakage indemnities protecting the buyer. Under closing accounts, the purchase price is estimated at signing and adjusted after completion based on actual figures.

What is sandbagging in an M&A transaction?
Sandbagging refers to whether a buyer may still bring a claim after completion for a breach he already knew about before completion. In the Netherlands this is virtually excluded; in the US it still occurs but is declining.

Does the Dutch Civil Code apply alongside a Dutch SPA?
Generally not. Dutch SPAs systematically exclude statutory remedies under the Dutch Civil Code, such as rescission and mistake, meaning the SPA itself forms the sole basis for claims.

How long do warranties survive under a Dutch versus a US SPA?
In the Netherlands, 18 to 24 months is standard for general warranties. In the US, this is typically 12 months.

Is specific performance enforceable under a US SPA?
Not automatically. Under US law, damages are the primary remedy, and specific performance is granted by the court only at its discretion.

Do you have questions about a cross-border M&A transaction between the Netherlands and the United States? BUREN's M&A team regularly advises on international transactions and would be pleased to discuss how we can support you. Please feel free to contact us.