It depends on the law governing the share transfer agreement and on the representations the seller made in it. In Czechia, the sale of a share for a price is a sale and purchase contract, and where there is a defect—which, under the contract, may include an untrue representation about the company's condition—the buyer may claim a reasonable price reduction. In Slovakia, the provisions on price reductions are drafted for goods, so the claim rests primarily on the contract and on damages. In both countries, it helps if the contract specifies in advance how the reduction will be calculated and which part of the price will be used to satisfy it.
After taking over a company, the buyer discovers that its accounts failed to record liabilities, a key customer is leaving, or a tax audit is underway that the seller did not disclose. The buyer then asks whether it can pay less. A share transfer does not change the company itself. Only its shareholder changes. The buyer’s claim therefore always depends on its contract with the seller and the law governing that contract, and Czech and Slovak law differ on this point.
Czechia: a share sale is a sale of property
In its judgment of 6. 5. 2025, case no. 23 Cdo 713/2024, the Supreme Court of the Czech Republic reiterated that a share in a limited liability company is intangible movable property. Its transfer for consideration constitutes a sale and purchase contract under Section 2079(1) of the Czech Civil Code (Act No. 89/2012 Sb.), so remedies for defective performance apply. If the defect constitutes a material breach of contract, the buyer’s options include withdrawal from the contract or a price reduction (Section 2106(1)). For a non-material breach, the following applies:
The following quotation is reproduced in its original language:
Je-li vadné plnění nepodstatným porušením smlouvy, má kupující právo na odstranění vady, anebo na přiměřenou slevu z kupní ceny.
In the dispute under consideration, the contract defined what constituted a defect in the share. The share was defective if any representation by the seller was untrue, inaccurate or incomplete, such as a representation that no material adverse changes had occurred in the business. The court held that the rules on price reductions outside consumer contracts could generally be varied by agreement, and also upheld an agreement that an expert agreed upon in advance would determine the amount of the reduction if the parties disagreed. It then remained for the court to assess whether the defect actually existed, whether the buyer had asserted its claim in time and whether the expert had followed the agreed parameters. The Supreme Court also stated that, in the circumstances of the case, the disputed nature of the price reduction claim did not prevent it from being set off against the unpaid second instalment of the price, because both claims arose from the same contract, which expressly contemplated such a set-off. It remitted the case for further proceedings and therefore did not decide on the amount of the reduction.
Czechia: what helps and what harms the buyer’s position
The law does not grant remedies for a defect that the buyer would necessarily have recognised when entering into the contract had it exercised ordinary care. This does not apply if the seller expressly assured the buyer that the property was free from defects or fraudulently concealed the defect (Section 2103 of Act No. 89/2012 Sb.). In a company acquisition, what the buyer saw during due diligence therefore also matters. The contract may expressly provide that matters disclosed during due diligence do not constitute defects, as was also the case in the dispute under consideration.
A defect must be notified without undue delay, and a hidden defect no later than 2 years after handover (Section 2112(1) of Act No. 89/2012 Sb.), unless the contract sets a different period, as the contract in the dispute under consideration did. However, the seller cannot rely on late notification if the defect results from a fact of which it knew or must have known at handover (Section 2112(2)); this applies precisely to a seller who knew about the problems and remained silent.
Slovakia: the contract and damages are decisive
Share transfer agreements are governed by Part Three of the Commercial Code (Act No. 513/1991 Zb.), regardless of the nature of the parties (Section 261(6), letter a)). However, the sale and purchase contract defined in that Code concerns the supply of movable property, namely goods (Section 409(1)), and the provisions on a reasonable price reduction for defects are also drafted for goods (Section 436(1)). Their direct application to a share in a company cannot be relied upon.
The buyer therefore relies primarily on damages for breach of a contractual obligation (Section 373) and on the consequences the contract specifies for an untrue representation, such as a price reduction calculated using an agreed method. The right to damages cannot be waived in advance (Section 386(1)). The limitation period is 4 years (Section 397); for damages, it runs from the day on which the buyer learned or could have learned of the damage and of the person liable to compensate for it, subject to an ultimate limit of 10 years from the breach of the obligation (Section 398). The scope of representations, limits on the seller’s liability and the associated risks are discussed in the article representations and warranties on a share sale (forthcoming) (in Slovak).
Funds available to satisfy the price reduction
The easiest way to satisfy the claim is from a portion of the price that the buyer has not yet paid. A deferred instalment, a retention or holding part of the price in escrow therefore protects the buyer in both countries. How escrow is arranged is explained in the question on lawyer-held escrow on a company sale. The contract should also specify how the reduction is to be calculated and who will determine it if the parties disagree.
We will assess the contract and the seller’s representations under Czech or Slovak law and explain what claim they give you. If the seller resists the claim, we will represent you in litigation. For your next acquisition, we will structure the representations, the calculation of any price reduction and the retention as part of our company sales and acquisitions service, and draft the representations based on the findings of legal due diligence on the company.
This answer provides general information on the law as at 3 October 2026. It does not constitute legal services or replace an assessment of an individual case. The details of your situation may differ. Book a consultation to discuss them.
