The framework of share deals
Ioannis Papatriantafyllou | Published in NOMIKI BIBLIOTHIKI Daily
The transfer and sale of shares (share deal) is the most common form of corporate acquisition and one of the most frequently used — yet legally complex — transaction structures in the field of mergers and acquisitions (M&A). Unlike an asset deal, where the buyer acquires specific assets, a share deal entails the acquisition of the entire corporate entity, together with all rights, obligations, and inherent risks.
Although, from a technical perspective, a share deal constitutes a transfer of shares or partnership interests, in practice — where all shares are transferred — it is equivalent to the sale of the business itself. For this reason, Greek law and legal theory accept that, by analogy, the rules governing the sale of goods apply, particularly with respect to defects affecting the business as an economic unit. Against this background, the seller’s liability emerges as a central issue.
By acquiring the shares, the buyer automatically steps into the company’s full legal and economic position. This makes the seller’s representations and warranties, as well as the scope and quality of the due diligence process preceding the transaction, critically important.
Within this context, particular attention should be paid to the recent article by our partner, Yiannis Papatriantafyllou, published in NB Daily by Nomiki Vivliothiki, entitled:
“Acquisition of a Business (Share Deal): Seller’s Liability and Buyer’s Knowledge as a Limiting Factor.”
Seller, buyer, and the delicate balance of liability
In a share deal, the seller’s liability is primarily grounded in inaccurate or incomplete representations and warranties. These typically relate to, inter alia, the company’s financial position, the legality of corporate acts, the existence of pending disputes, and compliance with the applicable regulatory framework.
Liability may also arise from the failure to disclose material information, as the seller is subject to a duty of candour and full disclosure vis-à-vis the buyer.
Overall, the seller’s liability is directly linked to:
- the contractual representations and warranties provided,
- the content and quality of the information disclosed, and
- the level of knowledge attributed to the buyer at the time the transaction is concluded.
As highlighted in the article, the buyer’s actual or imputed knowledge may exclude or significantly limit claims against the seller, even where material issues affecting the value of the business arise after completion.
Risk allocation and modern contractual mechanisms
The buyer’s knowledge directly affects the causal link between breach and loss. Where the buyer was already aware of a defect, the ability to claim damages is substantially restricted, unless otherwise expressly agreed, for example through sandbagging clauses.
Warranties, indemnities, and disclosure letters constitute key contractual tools for allocating risk. The disclosure letter, in particular, plays a pivotal role, as it elevates the buyer’s knowledge to a clearly defined contractual element. Its effectiveness, however, depends on the precision and completeness of the disclosures, since vague or generic statements may prove insufficient.
Conclusion
Buyer’s knowledge is a fundamental factor shaping the allocation of liability in share deal transactions. The balance between the seller’s duty of transparency and the buyer’s obligation to conduct proper due diligence ultimately determines who will bear the risk of issues materialising after closing.
The article by Yiannis Papatriantafyllou makes a meaningful contribution to the legal discourse on business acquisitions and reflects our firm’s broader strategic approach to high-complexity M&A transactions and corporate disputes. It serves as a practical guide for legal professionals, entrepreneurs, and investors seeking legal certainty in high-value transactions.
You can read full article (in Greek) in NB Daily HERE.
Disclaimer: This publication is intended for informational purposes only and does not constitute legal advice. Professional legal guidance should always be sought before acting on any information contained herein.