#SPA Drafting in France: Your Share Purchase Agreement

Your situation and your risks

You and your counterparty have agreed the main terms of a sale of shares: price, scope, timetable. The sale agreement, often called an SPA (share purchase agreement), must reflect these agreements without ambiguity. An imprecise clause opens the door to disagreements after signing. An inconsistency between the agreement and its schedules has the same effect.

The sensitive points are well known: conditions precedent, price mechanism, the seller’s representations and warranties, warranty and indemnity (garantie d’actif et de passif), caps, baskets (deductibles) and claim periods. They must be drafted on the basis of the findings of the due diligence. Whether you are the buyer or the seller, the balance of these clauses determines your exposure after the sale.

What legal framework governs a share sale in France?

Shares in an SA (public limited company) or an SAS (simplified joint-stock company) are financial securities (Article L. 211-1 of the French Monetary and Financial Code (Code monétaire et financier) (in French)). Title to them passes when the shares are registered in the buyer’s securities account (Article L. 211-17 (in French)). The agreement therefore organises closing around this registration and the payment of the price. For shares in an SARL (private limited company), the transfer must be recorded in writing (Article L. 223-17 of the French Commercial Code (Code de commerce) (in French), referring to Article L. 221-14 (in French)). It becomes enforceable against the company by formal service, or by filing an original at the registered office against a certificate from the manager (gérant). It is only enforceable against third parties after that, once the amended articles of association have been published in the Trade and Companies Register.

Conditions precedent are governed by the French Civil Code. A condition is a condition precedent when its fulfilment makes the obligation unconditional (Article 1304 of the French Civil Code (Code civil) (in French)). If it fails, the obligation is deemed never to have existed (Article 1304-6 (in French)). The parties may also agree that fulfilment of the condition will take effect retroactively from the date of the agreement.

Representations and warranties add to the statutory rules without replacing them. A party who knows information of decisive importance for the other party’s consent must disclose it, if the other party is legitimately unaware of it. This duty does not cover the estimate of value, and the parties can neither limit nor exclude it (Article 1112-1 of the Civil Code (in French)). Intentionally concealing information that one knows to be decisive constitutes fraudulent misrepresentation (dol) (Article 1137 (in French)). Finally, a clause that deprives the debtor’s essential obligation of its substance is deemed unwritten (Article 1170 (in French)).

How we draft your SPA

• Structure the agreement: recitals, definitions, subject matter and price, conditions precedent, representations and warranties, indemnification, closing, schedules.
• Draft the price mechanism: fixed price, adjustment based on reference accounts, or earn-out, with precise accounting definitions.
• Draft objective conditions precedent, with a long-stop date and a clear outcome if they are not fulfilled.
• Draft or negotiate the representations and warranties, then the warranty and indemnity: cap, basket, duration, notification procedure and any security.
• Prepare the closing checklist: share transfer order (ordre de mouvement de titres), corporate resolutions, resignations and appointments, formalities.
• Check overall consistency between the agreement, its schedules and any agreements concluded in parallel.

For an overview of the transaction, see also our SPA lawyer (in French) and mergers and acquisitions pages.

What is at stake for you

For the buyer, precise representations and a well-calibrated warranty strengthen its position if a problem is discovered after the sale. For the seller, the cap, the basket and the duration of the warranty define the limits of its exposure. In both cases, a detailed claims procedure limits arguments over form and refocuses the debate on substance.

A rigorous agreement does not remove every risk of dispute, but it narrows the areas of uncertainty. Every situation is different: the allocation of risk depends on the results of the due diligence and on the balance of power between the parties.

Every situation is different: the information on this page is general and does not replace legal advice tailored to your case. The firm makes no promise of outcome; it commits to the means it deploys.