Share purchase agreements and price mechanisms: step by step means five linked stages: choosing between a locked box and completion accounts, negotiating adjustment mechanics, drafting price-related warranties, satisfying conditions precedent, and completing against the agreed schedules. Under Swedish law, none of this sequence is fixed by statute; each stage is shaped by what the parties negotiate.
Who this concerns
This sequence concerns anyone negotiating the sale or purchase of shares in a privately held Swedish company: strategic buyers, private equity sponsors, family owners exiting a business, and the management team caught between the two sides of the table. It also concerns in-house counsel and finance teams who draft or review the price clause long before the deal reaches a data room, because the choice of mechanism drives due diligence scope, the shape of the warranty package, and how the closing schedule is built.
Where the buyer, the seller or the target's ultimate parent company sits outside Sweden, three things change inside this sequence. The price clause needs an explicit currency and conversion-timing rule, because a locked box price fixed in one currency and completed in another carries foreign-exchange exposure that a purely domestic deal does not. The governing law and forum clause stops being boilerplate, because a price dispute under a completion accounts mechanism is decided under whatever law and forum the parties chose, not automatically under Swedish law merely because the target company is Swedish. And notification duties, such as foreign investment screening or beneficial-ownership filings, run on their own clock alongside the price mechanism and can delay completion regardless of how tight the adjustment timetable is.
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What the law says
Under Swedish law as it currently stands, no statute prescribes how the price for shares in a private company must be set, adjusted or verified. The share purchase agreement, known in Sweden as an aktieöverlåtelseavtal, is a freely negotiated contract, and the price mechanism inside it is read under general principles of contract law rather than under any sector-specific pricing regime. This is why the same commercial outcome, the buyer pays the seller a sum for the shares, can be documented through a locked box, through completion accounts, through an earn-out, or through a combination of the three, with no mechanism enjoying statutory preference over another.
What general contract law supplies is the interpretive framework once a dispute arises: how the price clause is read against the rest of the agreement, what weight is given to defined terms such as net debt or normalised working capital, and how silence on a point gets resolved. None of that tells the parties which mechanism to choose. It tells a court, later, how to read the mechanism they did choose. That is why drafting carries more weight in a Swedish share deal than in markets where a standard form or a statutory adjustment rule narrows the choice from the outset.
How it works in practice
Setting the pricing model at the outset
Before a single schedule is drafted, the parties need to agree which family of mechanism the price belongs to. The two dominant families are a locked box, where the price is fixed by reference to a balance sheet dated before signing and does not move at completion, and completion accounts, where the price is provisional at signing and adjusted after completion once accounts as at the completion date are finalised. A third family, the earn-out, defers part of the price to a future measurement period tied to post-completion performance. Most deals combine one of the first two with elements of the third rather than choosing a single pure mechanism.
Locked box: fixing the price before completion
A locked box sets the price by reference to a locked box balance sheet, typically the most recent set of management or audited accounts before signing. From that date, called the locked box date, the seller commits to running the business in the ordinary course and not extracting value outside agreed permitted leakage. The buyer takes the economic risk and benefit of the business from that date, even though legal completion happens later. This mechanism suits sellers who want price certainty and buyers who trust the target's reporting discipline enough to skip a post-completion adjustment.
Leakage protection in a locked box structure
Because the price is fixed before completion, the entire commercial protection in a locked box sits in the leakage covenant and the leakage warranty, not in a later adjustment. The agreement needs to define leakage precisely: dividends, management fees, waived debts, above-market related-party payments, and transaction bonuses paid by the target rather than the seller. It then needs to carve out permitted leakage, items both sides accept as ordinary course, and set out what happens if leakage is discovered after completion: typically a krona-for-krona repayment obligation rather than a full price renegotiation.
Completion accounts: adjusting the price after completion
A completion accounts mechanism starts from an estimated price at signing and finalises it once accounts as at the completion date are prepared, usually within a fixed window after completion. The adjustment typically runs through net debt and working capital: the estimated price is corrected for the difference between actual and target working capital, and for actual net debt against an assumed figure. This mechanism suits deals where the business is not stable enough for a locked box to be credible, or where the buyer wants a genuine look at the numbers as they stand on the day it actually takes control.
The objection and expert determination sequence
Every completion accounts clause needs an objection procedure: a period during which the receiving party can dispute the draft accounts, a requirement to identify disputed items specifically rather than in general terms, and a fallback to an independent accountant or expert if the parties cannot agree. The clause should state whether the expert acts as an expert or an arbitrator, because that choice affects whether the determination can later be challenged on process grounds. Vague drafting at this single point is one of the most common sources of post-completion dispute in Swedish share deals, more common than disputes over the substantive accounting itself.
Earn-outs and deferred consideration
An earn-out ties part of the price to performance after completion, usually revenue or EBITDA over one or more measurement periods. It bridges a valuation gap where the buyer and seller disagree on future performance, letting the seller collect more if the business performs as they projected. The mechanism only works if the agreement also constrains how the buyer runs the business during the earn-out period, because a buyer that integrates the target, changes its cost base, or redirects customers can suppress the very metric the earn-out is measured against, whether or not that was the intention.
Escrow, holdback and price security
Where the buyer wants recourse against the price itself rather than a bare contractual claim against the seller, part of the price is held back in escrow or retained by the buyer for a set period. This gives the buyer a fund to draw against for warranty claims or leakage claims without having to enforce a judgment against a seller who may by then have distributed the proceeds. The release mechanics, what triggers release, what triggers a hold, and what happens to unresolved claims at the release date, need the same drafting precision as the price adjustment clause itself.
Sequencing: signing, conditions precedent and completion
The price mechanism does not operate in isolation from the rest of the transaction timetable. Signing fixes the price mechanism and the warranty package; conditions precedent, such as competition clearance or investment screening approval, then need to be satisfied before completion can occur; and completion is the point at which the locked box economic transfer, or the completion accounts baseline, actually takes effect. A gap between signing and completion changes which mechanism makes sense: the longer that gap, the harder a locked box becomes to defend, because more can happen to the business before the buyer takes control.
What to check before signing
- The locked box date and whether the leakage definition covers every value-extraction route open to the seller, not just dividends
- Whether the completion accounts policies match the accounting policies used to prepare the historical accounts relied on in due diligence
- Who bears the cost of preparing and, if disputed, defending the completion accounts
- Whether the expert determination clause specifies expert or arbitrator status and a binding effect on both sides
- Whether earn-out metrics can be manipulated by ordinary post-completion management decisions
- Whether escrow release dates line up with the warranty claim notification deadlines elsewhere in the agreement
- Whether currency and conversion timing is addressed where either party sits outside Sweden
Frequently asked questions
#### What is the practical difference between a locked box and completion accounts?
A locked box fixes the price before completion and relies on a leakage covenant to protect that price; completion accounts leaves the price provisional at signing and adjusts it after completion once actual accounts are prepared. The choice depends on how confident the buyer is in the target's reporting and how much risk each side is willing to carry for the gap between signing and completion.
#### Does using an earn-out reduce the risk of a price dispute?
Not on its own. An earn-out narrows a valuation gap at signing, but it introduces a new dispute risk around how the target is run during the measurement period. Whether it reduces overall dispute risk depends on how tightly the agreement constrains post-completion management decisions that affect the earn-out metric.
#### Who decides a dispute over completion accounts if the parties cannot agree?
The agreement should name a fallback, usually an independent accountant acting as expert, and specify whether that determination is final and binding. Without that fallback specified in the contract, the dispute falls back to ordinary litigation or arbitration under the agreement's general dispute clause, which is slower and less predictable than an expert mechanism built for this purpose.
The numbers
No period in this sequence is fixed by statute; every date below is a matter of negotiation and can be shortened, extended or removed entirely by agreement. What tends to recur across Swedish share deals is a structure rather than a fixed figure: a locked box date set close to the most recent set of reliable accounts, an objection window after delivery of draft completion accounts long enough for the receiving party's accountants to review the underlying ledgers rather than just the summary figures, and an escrow release date set to follow, not precede, the last warranty claim notification deadline in the agreement. Where the parties import a foreign template, the numbers attached to these steps often come from a different market's convention and need to be checked against what actually suits a Swedish target's reporting cycle and audit timetable, rather than carried over unchanged.
Where it usually goes wrong
A locked box stops making sense once the gap between the locked box date and completion stretches out, because more time gives more room for undetected leakage or for the business to change in ways the leakage covenant was never drafted to catch. It also stops working where the target's management accounts are not reliable enough to be locked in as the pricing baseline, in which case a buyer accepting a locked box is pricing on numbers it cannot fully trust.
Completion accounts break down where the accounting policies are defined loosely: if the clause says the accounts are prepared in accordance with the company's normal accounting policies without specifying which policies applied historically, both sides end up arguing about which policy is normal at the exact moment it matters most. The objection procedure fails in the same way if it does not require the objecting party to identify disputed line items specifically; a general objection to the whole set of accounts gives the expert nothing to determine.
Earn-outs reverse from a bridge to a source of litigation once the buyer integrates the target into a wider group. At that point, allocating revenue or cost between the earn-out business and the rest of the group becomes a judgement call the seller did not sign up to accept from the buyer unilaterally, and the earn-out clause needs its own accounting and information-access rules to survive that scenario. Where none of that was drafted at signing, the earn-out becomes the largest single source of post-completion dispute in the transaction.
What to do next
The steps above cover how a price mechanism is chosen, drafted and executed. What they cannot cover is whether a specific draft clause, in a specific deal, exposes either side to a claim once the numbers come in: that turns on the actual wording, the actual accounts, and the actual conduct during the interim period. Where a warranty or indemnity claim looks likely once completion has happened, the analysis of cost and likely outcome is set out in warranty and indemnity claims: cost and likely outcome.
Where the question is not yet a claim but a draft clause that needs pressure-testing before signing, that is the point where self-directed drafting ends and an assessment of the specific mechanism begins. Book an assessment call with the drafting and the accounts to hand.