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A disclosure letter is the seller’s letter listing the facts that qualify the warranties in a share purchase agreement (SPA). Under Dutch law it protects the seller only as far as the SPA links the warranties to it and each disclosure is clear. At MAAK Advocaten in Amsterdam, we review disclosure letters for foreign buyers and sellers before signing.
This article is for companies abroad that buy or sell a Dutch business under an SPA governed by Dutch law. For the transaction as a whole, see our page on mergers and acquisitions in the Netherlands.
What is a disclosure letter in a Dutch share purchase?
A disclosure letter is a document from the seller to the buyer that sets out exceptions to the warranties in the SPA. What the seller discloses there, the buyer cannot later claim as a breach of warranty, provided the SPA says so.
Dutch statute law does not mention disclosure letters. Their effect follows from the contract: an agreement binds the parties and also has the consequences that follow from the law, custom and reasonableness and fairness (Article 6:248 Dutch Civil Code). A share purchase is a sale of a property right, so the statutory rules on sale apply only as far as they fit the nature of that right (Article 7:47 Dutch Civil Code).
A disclosure letter can have three layers. Each one shifts risk in its own way:
| Layer | What it does | Point to check |
|---|---|---|
| General disclosures | Treats broad sources as disclosed, such as public registers or the full data room | Whether the SPA accepts general disclosure at all, and against which warranties |
| Specific disclosures | Links a named fact to a named warranty, for example a pending claim | Whether the fact and its consequences are described clearly enough |
| Disclosure bundle | Attaches or lists the documents behind the disclosures | Whether the bundle is fixed and identifiable at signing |
How does a disclosure letter limit the seller’s warranties?
The disclosure letter limits the warranties only through the SPA. If the seller warrants that statements are correct “except as disclosed”, a disclosed fact is carved out and cannot found a warranty claim.
A Supreme Court case on a share sale of a group of waste processing companies shows this structure. The seller warranted that the statements in an annex were correct and not misleading, “except insofar as the contrary appears from the disclosure letter”. The SPA obliged the seller to compensate the buyer for a breach of warranty (Dutch Supreme Court 7 February 2014, ECLI:NL:HR:2014:260, Afvalzorg/Slotereind). A warranty claim is therefore a contractual claim; the general rule on damages for failure to perform is Article 6:74 Dutch Civil Code. The Supreme Court did not rule on the disclosure letter itself; its rulings concern interpretation and timely notice, discussed below.
Every line in the disclosure letter reduces the buyer’s protection; whether a vague line counts as disclosure is a matter of interpretation.
Important: A seller that sends a long disclosure letter with general disclosures of the entire data room a day before signing may shift known risks to the buyer. The buyer then keeps few warranty claims under the SPA and Article 6:74 DCC. Have a Dutch corporate lawyer review the disclosure letter and the SPA definitions together before you sign.
Received a disclosure letter for a Dutch deal? Send it with the draft SPA through our page for a Dutch corporate lawyer, and we will tell you which disclosures shift risk to your side.
How does a Dutch court read a disclosure letter?
A Dutch court asks what meaning the parties could reasonably give the SPA and the disclosure letter in the circumstances, and what they could reasonably expect of each other. The words weigh heavily, but never decide on their own.
That standard dates from the Haviltex judgment: a written contract cannot be read on a purely linguistic basis, and the parties’ social circles and expected legal knowledge may matter (Dutch Supreme Court 13 March 1981, ECLI:NL:HR:1981:AG4158). In Afvalzorg/Slotereind the Supreme Court confirmed that this does not change merely because the SPA was concluded between professional parties assisted by external legal advisers. Even where the linguistic meaning carries great weight, the other circumstances can lead to a different reading (ECLI:NL:HR:2014:260, r.o. 4.2.2).
For a disclosure letter, the drafts and the data room questions and answers can all count. A general disclosure that seems watertight in English may be read more narrowly by a Dutch court if the negotiations point the other way. Reasonableness and fairness can also set aside a contractual rule where applying it would be unacceptable (Article 6:248(2) DCC).
Does the buyer’s own knowledge limit its warranty claims?
Dutch law has no fixed rule for warranty claims on facts the buyer already knew. The SPA decides first; without a clear clause, a Dutch court interprets the agreement and may apply the statutory sales rules where they fit.
Under those rules, a buyer cannot rely on non-conformity it knew of, or could reasonably have known of, when the contract was concluded (Article 7:17(5) Dutch Civil Code), which applies to shares through Article 7:47 DCC. For knowledge clauses, see our page on warranties and indemnities under Dutch contract law.
Important: If due diligence reveals a tax, environmental or litigation risk, a warranty may not cover it once the risk is in the disclosure letter, and the buyer’s own knowledge may count against it (Article 7:17(5) DCC). Before signing, have a Dutch corporate lawyer decide with you whether it needs a specific indemnity or a price adjustment.
What if the seller kept something back?
A seller that should have informed the buyer cannot simply argue that the buyer should have investigated better. Outside the warranties, the buyer may then invoke mistake (dwaling) and have the SPA annulled (Article 6:228 DCC) or modified by the court (Article 6:230 Dutch Civil Code).
A contract concluded under the influence of mistake, which would not have been concluded had the facts been known, is voidable if, among other grounds, the other party should have informed the mistaken party in view of what it knew or ought to have known (Article 6:228(1)(b) Dutch Civil Code). In a sale of shares, the Supreme Court held that good faith will generally prevent a party that should have given information from arguing that the other party has itself to blame for the mistake. A buyer’s failure to investigate does not, by itself, exclude the seller’s duty to inform (Dutch Supreme Court 16 June 2000, ECLI:NL:HR:2000:AA6237, r.o. 3.4).
A mistake that should remain for the buyer’s account, for example by the nature of the contract or the circumstances, does not give a ground for annulment (Article 6:228(2) DCC). An SPA may also exclude annulment for mistake; see our page on excluding annulment and modification of a purchase agreement. For the duties to disclose and to investigate in general, see our page on the duty of disclosure in the Netherlands. For a seller, a known problem therefore belongs in the disclosure letter.
How quickly must a buyer notify a warranty claim?
As quickly as the SPA requires. An SPA can set its own notice periods and claim deadlines; whether a late notice costs the buyer its claim depends on the wording and on all the circumstances.
In Afvalzorg/Slotereind the SPA required notice of a warranty breach “as soon as possible”. The Supreme Court held that the court of appeal had not explained why that wording meant loss of rights rather than, for example, a duty to compensate damage (ECLI:NL:HR:2014:260, r.o. 4.2.3). Even if late notice does cost the claim, timeliness depends on all circumstances, including that serious consequence and the seller’s concrete interests harmed by the delay (r.o. 4.3.1). The court of appeal also had to address the buyer’s argument that the seller knowingly kept silent about certain defects, so that relying on the notice clause would be unacceptable under reasonableness and fairness (r.o. 4.3.2). Where the SPA is silent, the statutory notice rule may apply through Article 7:47 (Article 7:23 Dutch Civil Code).
Important: A buyer that finds a problem after closing and first collects every defect into one large claim letter risks a dispute about late notice, as in the Supreme Court case of 2014. Have a Dutch corporate lawyer check the notice clause and send a first, reasoned notice as soon as you know of a breach.
How should buyers and sellers approach the disclosure letter?
Treat the disclosure letter as part of the price negotiation, not as an annex. The seller wants broad disclosure; the buyer wants specific disclosure and protection for the risks it has found.
Before signing, settle at least these points:
- whether general disclosure of the data room is accepted, and against which warranties;
- whether each specific disclosure names the fact and its consequences;
- whether the data room content is fixed and identifiable at signing;
- whether the letter is updated between signing and closing, and what the buyer may do then;
- how the buyer’s knowledge counts, and which notice periods apply.
How to settle them depends on your side of the deal and the due diligence findings; we judge that per transaction and do not publish model wording. Where a risk could also let the buyer walk away before closing, see our article on the MAC clause under Dutch law. For the full takeover route, see takeover of a Dutch company.
Practical example: a claim that was disclosed in the data room
This is an illustration, not a real case. A German group buys all shares in a Dutch installation company under an English-language SPA governed by Dutch law. The seller warrants that there are no pending disputes “except as disclosed”. The disclosure letter contains one general disclosure of “all documents in the data room”. One folder holds a customer’s letter announcing a claim for defective work, without further comment.
After closing the customer sues. The seller says the claim was disclosed; the buyer says a single letter buried in the data room is not a fair disclosure of a dispute. Under Dutch law the outcome turns on the SPA wording, the negotiation file and what the buyer actually knew. In this situation we would first secure the data room index and the correspondence, check the notice clause and send a reasoned notice, and then advise on a claim or a negotiated settlement.
When should you instruct a Dutch lawyer about a disclosure letter?
Instruct a Dutch lawyer when the first draft of the disclosure letter arrives, and again as soon as a warranty claim or a mistake argument arises after closing. The first moment fixes your protection; the second, your evidence and deadlines.
Outside cases before the cantonal judge, a party can only bring warranty claims before a Dutch district court through a lawyer (Article 79(2) Dutch Code of Civil Procedure). An English-language SPA does not change that the disclosure letter is read under Dutch law. We work alongside your in-house counsel or your lawyers at home, in English.
How does MAAK Advocaten handle disclosure letter issues?
We handle disclosure letters and warranty claims for buyers and sellers in fixed steps, from the first draft to court proceedings:
- We read the SPA, the warranties and the disclosure letter together, and list the risks that shift to your side.
- We compare the disclosures with the due diligence findings and the data room.
- We advise on the route that serves your commercial goal: a specific indemnity, a price adjustment or acceptance of the risk.
- After closing, we handle notices and negotiations and, if needed, act in proceedings at first instance and on appeal.
Frequently asked questions about disclosure letters in Dutch M&A
Is a disclosure letter required under Dutch law?
No. Dutch statute law does not require or regulate a disclosure letter. It is a contractual document, and its effect on the warranties follows from the share purchase agreement, read under the Haviltex standard and the rules on reasonableness and fairness in Article 6:248 of the Dutch Civil Code.
What is the difference between general and specific disclosure?
A general disclosure treats a whole source as disclosed, such as a public register or the complete data room. A specific disclosure links a named fact to a named warranty. Whether general disclosure is accepted, and against which warranties, is a point to settle in the share purchase agreement.
Can a buyer claim for a risk it knew about before signing?
That depends first on the share purchase agreement. Under the statutory sales rules, a buyer cannot rely on non-conformity it knew or could reasonably have known (Article 7:17(5) Dutch Civil Code), which applies to shares only as far as it fits. A known risk is best covered by a specific indemnity.
Can a buyer invoke mistake if the seller withheld information?
Possibly, if the seller should have informed the buyer and the buyer would not have signed had it known (Article 6:228(1)(b) Dutch Civil Code). The Supreme Court held in a share sale that the seller generally cannot argue that the buyer should have investigated better. The share purchase agreement may limit or exclude this remedy.
When should I involve a Dutch lawyer in a disclosure letter?
When the first draft arrives, and as soon as a warranty claim arises after closing. At MAAK Advocaten in Amsterdam we assess the disclosure letter against the share purchase agreement and the due diligence, and act in Dutch courts at first instance and on appeal.
Primary sources
- Article 6:74 Dutch Civil Code: damages for non-performance
- Article 6:228 Dutch Civil Code: mistake
- Article 6:230 Dutch Civil Code: modification instead of annulment for mistake
- Article 6:248 Dutch Civil Code: supplementing and restricting effect of reasonableness and fairness
- Article 7:17 Dutch Civil Code: conformity; buyer’s knowledge (paragraph 5)
- Article 7:23 Dutch Civil Code: notice of non-conformity
- Article 7:47 Dutch Civil Code: sale of a property right, such as shares
- Article 79 Dutch Code of Civil Procedure: representation by a lawyer
- Dutch Supreme Court 13 March 1981, ECLI:NL:HR:1981:AG4158 (Haviltex): interpretation of contracts
- Dutch Supreme Court 16 June 2000, ECLI:NL:HR:2000:AA6237: duty to inform and duty to investigate in a sale of shares
- Dutch Supreme Court 7 February 2014, ECLI:NL:HR:2014:260 (Afvalzorg/Slotereind): warranties qualified by a disclosure letter; interpretation; timely notice of a breach
Buying or selling a Dutch company and facing a disclosure letter? Put the draft or your warranty claim to us: call +31 20 210 31 38 or send your question through our page for a Dutch corporate lawyer.
