Seller Warranties: What You Actually Sign at the End of the Negotiation

A Swiss SME sale agreement rarely contains fewer than twenty seller warranties, and most owners discuss only a handful of them in detail before signing. Here are the nine clauses that keep weighing on the seller longest after closing, what they actually cover, and where they most often catch people off guard.

The nine clauses

1. Title to the shares. The seller confirms genuine ownership of the shares or units sold, free of any pledge, lien or third party right. It is the most basic warranty, and yet the one that stalls a transfer fastest if it turns out false: one forgotten minority shareholder or an overlooked charge on the shares is enough.

2. Accuracy of the financial statements. The seller confirms the accounts presented fairly reflect the company's position, with no hidden liability and no missing provision. This is the broadest warranty in scope, since it covers everything shown to the buyer during due diligence; it is only as reliable as the numbers prepared well ahead of the sale.

3. No undisclosed disputes. No pending or seriously threatened legal, arbitral or administrative proceeding that was left out of the disclosure schedule. A dispute the seller knew about but kept quiet, even a minor one, leaves the seller exposed to a claim long after the price was paid.

4. Tax and social security standing. Taxes, VAT and social contributions are current, and no ongoing tax audit threatens to reclassify prior years. This warranty typically survives longer than the others, pegged to statutory tax limitation periods rather than the contract's standard survival term.

5. Validity of commercial contracts. The client and supplier agreements listed in the data room are in force, not terminated, and free of change of control clauses that would trigger on the sale. Discovered after signing, such a clause can cost a key client with no one but the seller to answer for it.

6. Compliance with labour law. Employment contracts, occupational pension arrangements and any ongoing proceedings comply with Swiss law, with no hidden labour dispute. An underfunded second pillar arrangement is among the costliest discoveries once a file gets reopened.

7. Intellectual property. Trademarks, patents, domain names and software in use belong to the company or are properly licensed, with no undisclosed reliance on a tool the seller personally holds. An SME built around software still registered under the founder's own name is a classic case.

8. Completeness of disclosure. Everything that could reasonably influence the buyer's decision has been communicated in the form and timeframe the contract sets out. This is the umbrella warranty that closes the blind spots left by the previous seven, and the first one the buyer's counsel invokes the moment a disagreement surfaces.

9. Cap, threshold and duration. A maximum indemnification amount, often a fraction of the sale price, a threshold below which minor claims are not recoverable, and a limited survival period, usually twelve to twenty four months, except for tax and environmental matters which follow much longer statutory limitation periods. Negotiating these three parameters often matters more than arguing each warranty on its own, since together they cap the seller's real exposure regardless of what a strict reading of the clauses above later reveals.

10. Specific indemnities. Beyond the general set, buyers often negotiate a targeted indemnity for a risk identified during due diligence: a potentially contaminated site, a dormant contractual dispute, a tax position both sides already know is debatable. These tailor made clauses sit outside the usual caps and thresholds and deserve a separate, line by line read rather than a signature bundled in with the rest of the contract.

11. Warranty insurance. A growing share of mid sized Swiss transactions now carries a W&I policy, which shifts part of the risk sitting under the general warranties to an insurer. The seller gets a cleaner exit, without prolonged exposure on personal assets; the buyer gets recourse that does not depend on the seller's future solvency. The premium is negotiated and compared before signing, not after.

What most sellers discover too late is that the disclosure schedule protects more than the warranty wording itself: what it states explicitly falls outside indemnification, while what stays unsaid remains exposed for the whole survival period of the contract. Price escrow secures the buyer's side of enforcing these warranties; on the seller's side, the best protection remains disclosing as completely as possible, even on what looks minor at the time of drafting. The list above reads in an hour. The file it takes to fill it in properly, on the other hand, gets built months before a buyer ever asks for the signed version, alongside the rest of the legal due diligence.