By Andrew Schumacher, Brad Monk and John Kincade

The COVID-19 pandemic has caused a sudden disruption to businesses and halted almost all forms of global commerce. Contractual parties, lenders and borrowers, and parties to Merger and acquisition agreements are now closely reviewing their contracts, loan agreements and, in particular, any Material Adverse Change clause (also called Material Adverse Effect) (“MAC”) in the contract to analyze what options they might have.  In business use, MAC is a change in circumstances that causes a substantial decline in the value of a business. If successfully invoked, the MAC clause allows the party to avoid its obligation – such as closing on a merger or acquisition or funding a loan — as required by an otherwise enforceable agreement. Although perhaps similar in some respects to its cousin the force majeure clause, force majeure describes facts that constitute contractual impossibility due to an unforeseeable event. See Perlman v. Pioneer Ltd. P’ship, 918 F.2d 1244, 1248 n. 5 (5th Cir. 1990) (citing 6A Arthur L. Corbin, Corbin on Contracts § 1324 (1962)). So although the end goal of invoking a MAC clause may be the same as invoking the force majeure, the MAC clause may allow parties to avoid their obligations under a contract because of a material adverse change in the other party’s financial condition despite that fact performance of the contract is still possible.
Continue Reading What a Business Should Know Before Triggering a MAC Clause Based on COVID-19

The Securities and Exchange Commission (the “Commission”) on Friday, March 13, 2020, granted temporary relief under the Investment Advisers Act of 1940 relative to certain filing and delivery deadlines and other requirements that the adviser cannot meet because of the current COVID-19 pandemic. See INVESTMENT ADVISERS ACT OF 1940 Release No. 5463 (March 13, 2020) (the “Order”).

Continue Reading The SEC Grants Temporary Relief Due to the Coronavirus COVID-19 Pandemic