UK:
Material Adverse Change/MAC
09 November 2011
Reed Smith (Worldwide)
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MAC clauses act as a "catch all" provision and aim to
allow a lender to call a default if there is an adverse change
either in the borrower's position or circumstances or in the
wider environment after a defined date.
It is extremely difficult to rely on a MAC clause in practice,
in particular when the relevant event or occurrence affects not
only the borrower but other companies more generally. The Takeover
Panel have said that:
"meeting [its material significance] test requires an
adverse change of very considerable significance striking at the
heart of the purpose of the transaction in question, analogous ...
to something that would justify frustration of a legal
contract" (Panel Statement 2001/15 of 6th November,
2001).
Very few lenders would contemplate seeking to rely on a MAC
clause because the risk of litigation for a lender relying on that
provision, either as a drawstop or an acceleration event, is
high.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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