Material Adverse Change Clause Share Purchase Agreement

This does not mean that Microsoft can leave for no reason. When the closing agreement is announced, the buyer and seller sign the merger agreement, which is imposed on both the buyer and the seller. If the buyer leaves, the seller will take legal action. The main English authority, Grupo Hotelero Urvasco (see above), suggests that significant negative changes require a permanent and non-temporary effect. Although the assessment of this position may be less simple, as it seems very difficult to say how long the pandemic (and its effects) will last. The availability of public assistance to businesses can also have an impact on the situation. It is more likely that a MAC clause can be used in the current situation, in which it has been specifically formulated to include the deterioration of the target entity`s activity and general outlook over a given period (e.g. B during this fiscal year). In the case of Cukurova Finance International Ltd – Anor v Alfa Telecom Turkey Ltd (British Virgin Islands) [2013] UKPC 2 (30 January 2013), the Privy Council found that Alfa could invoke a MAC clause. The event on which Alfa relied was the adoption of an arbitration award which could result in significant claims for damages against Cukurova. In this case, the appearance of the significant adverse amendment depended on Alfa`s opinion, making him the “judge in his own case”. However the court had to be convinced that the Alfaehrlich and the Rationality were. This is an example of a case where the text of the MAC clause has placed a party (Alfa) in a particularly strong position.

Depending on the duration of the Covid 19 crisis and its impact, MAC clauses in share purchase contracts could be the subject of closer negotiations between the parties in the near future. At the same time, the Covid 19 crisis can lead to a shift towards a more buyer-friendly environment, which could strengthen the position of buyers when negotiating the specific text of the MAC clauses or improve the buyer`s ability to obtain protection against harmful changes. From the buyer`s point of view, the wording of the MAC clause should be as precise as possible and, where possible, contain specific thresholds and concrete examples of underlying events, among others, that could cause a major adverse change in the share purchase agreement, such as the pandemic or natural disasters, without including too many general events that may , in the end, will weaken the applicability of the MAC clause. Even if the MAC clause itself was not applicable in a particular case, the inclusion of a MAC clause in a share purchase agreement may also have other indirect effects on the parties. In situations where the applicability of a MAC clause remains unclear in the current circumstances, the inclusion of a MAC clause could ultimately lead to a renegotiation of price conditions, unless the price mechanism and other relevant conditions under the share purchase contract already provide sufficient comfort to that extent. In Kitcatt v MMS UK Holdings [2017] EWHC 675, the Tribunal considered a MAC clause containing the words “substantial negative effects.” It was pointed out that what is considered “essential” would involve the exercise of the sentence and could, in a marginal case, be a point on which opinions could reasonably differ. This indicates that, while the MAC clause may be deliberately worded as a catch-all clause, it may be useful to add a non-exhaustive list of examples. It should also be remembered that it may be more difficult for parties who conducted operations after the beginning of the COVID 19 pandemic to avail themselves of a MAC clause, since they must prove that there was a significant change that they did not know existed at the time of the agreement, i.e. that they were aware of the pandemic , which surround them, substantially modified.