Material adverse change meaning

What is the purpose of tariffs? Tariffs are a type of tax, levied by states to raise income and, by extension, strengthen their economy. They are applied to items brought in from abroad, usually worked out as a percentage of the goods’ price and settled by the importer. Tariffs may equally serve as a political instrument, underpinning protectionist foreign policy by deterring consumers from purchasing products that originate overseas. Where imported items are pricier than home-made alternatives, the theory is that buyers will favour domestic options. Tariffs can furthermore be deployed to choke off supplies from particular nations, on the footing that the added expense becomes too great for the supply chain to absorb—in that way they function as a geopolitical tool as well as an economic one. How do tariffs impact your existing contracts? Across a supply chain, tariffs create difficulty. Under the agreement governing the provision of the goods or materials to which the tariffs relate, one contracting party will inevitably have to shoulder the...

Pevensey Coastal Defence Ltd v Environment Agency [2024] EWHC 1435 (TCC)) What are the practical implications of this case? This dispute is highly fact‑sensitive, largely focused on construing terms in a particular PFI contract. Nonetheless, some issues of broader interest arise from the circumstances prompting the claim and the treatment of clauses addressing adverse weather — here, the escalation in storm activity along the Sussex coast — within a PFI arrangement that began in 2000 and ends in 2025. Parties might scrutinise the Change Control Schedule wording in the judgment and decide whether to seek the same outcome recognised here (namely, that costs could be recoverable where there has been a material rise in storm incidents/adverse weather). In essence, the issue was whether the Change Control Schedule allowed recovery of extra costs from a material uptick in storm events. Similar PFI parties should review that drafting. What was the background? Pevensey Coastal Defence Limited (PCDL) and the Environment Agency (EA) entered into a PFI contract dated...

Ukraine conflict—impact of Russian invasion and sanctions on English law contracts—frustration, illegality, force majeure & MAC Does your agreement contain an illegality, force majeure or material adverse change (MAC) provision and, if so, has it been engaged? This turns on construction, so the orthodox approach applies—scrutinise the pertinent circumstances and the wording of the provision. What, precisely, is the operative occurrence? It might be a legal development (eg whether making payment would constitute a criminal offence) or a factual situation (routes are blocked, power is unavailable, the plant has been hit). Does that occurrence fall within the clause’s reach, expressly or by necessary implication? Many force majeure provisions enumerate events that qualify. An illegality provision may identify the system of law under which performance must have become unlawful. MAC provisions frequently do not delineate what is covered, relying instead on the plain sense of the expression. Determine whether the occurrence advanced to justify invoking the provision is captured. Where event lists appear, parties can dispute whether the occurrence relied...

The concepts of material adverse change (MAC) and material adverse effect (MAE) are deployed in distinct yet connected ways in a standard facility agreement. Material adverse effect Facility agreements typically include a defined term for material adverse effect. Its primary function is to qualify specified representations, undertakings and events of default. Material adverse change A material adverse change in the borrower’s circumstances is often treated as a separate event of default. This provision is routinely the subject of heavy negotiation, with variations in scope. A common formulation links the MAC event of default back to the MAE definition. The borrower is also required to represent—sometimes on a repeating basis—that no material adverse change has occurred to its business or financial condition since the date of the most recent financial statements delivered to the lender. The drafting of the material adverse effect definition determines both the reach of the qualifications applied to the relevant representations, undertakings and events of default, and what will constitute the MAC...

Coronavirus (COVID-19)—impact on private M&A transactions [Archived] ARCHIVED: This archived Practice Note examined how the coronavirus (COVID-19) pandemic affected private M&A (share purchase or asset purchase) deals. It has not been revised since May 2022. Factors affecting deal activity For the duration of the coronavirus (COVID-19) outbreak, many strands of corporate law will be influenced, shaping the work of legal practitioners and their clients. The effects on private M&A transactions are likely to extend beyond the pandemic’s immediate timeframe, given the wider repercussions for the economy and for individual businesses. Direct consequences arising from the pandemic include: financial viability of pursuing an acquisition—amid the economic turmoil and global shock, can buyers access the requisite funds to complete a private M&A deal? A prospective purchaser may prefer to preserve or strengthen cash reserves, rather than hunt for acquisition prospects, as a prudent approach to financial management to withstand the challenges posed by the COVID-19 pandemic heightened transaction risk—concluding a deal during a period of...

This glossary sets out numerous expressions frequently encountered in the restructuring arena. Words appearing in the definitions in bold are explained in other entries in this glossary. For further banking terminology, see the principal Banking & Finance Glossary. Restructuring glossary—A Acceleration: Acceleration means the agent, acting on directions from the majority lenders after an event of default, takes formal action, for example calling for early repayment of the facility. Ad-hoc committee: A temporary creditors’ group (often contrasted with a formal committee) that lacks any entitlement to official recognition. Administration: A process under the IA 1986 in which a financially distressed company is operated by an administrator as a going concern before longer-term outcomes, such as break-up and sale, are pursued. Administrator: An Insolvency Practitioner named by the court, a Qualifying floating charge holder, the directors or the company, to take control and fulfil one of the purposes in IA 1986, Sch B1. Administrative receivership: Arises when a company breaches the terms of...

Insert the following as a new definition (if not already included) in the definitions and interpretation clause of the share purchase agreement: 1 Definitions and interpretation Warranties means the warranties [ and representations ] set out in Schedule [ insert number ], and Warranty denotes any one of them; 1 Termination of this Agreement by the Buyer 1.1 In addition to any entitlement of the Buyer to recover damages for a breach of Warranty, the Buyer may terminate or rescind this Agreement (as applicable) at any time with immediate effect by written notice to the Seller if, between the date of this Agreement and Completion: 1.1.1 the Seller is in breach of clauses [ insert number ] to (and including) [ insert number ]; 1.1.2 [ the Seller is in [ material ] breach of any of the Warranties or would be in [ material ] breach of the Warranties if the Warranties were repeated at Completion, or...