Introduction

The COVID-19 pandemic has raised a fundamental question for M&A participants: does the outbreak of COVID-19 and the impact on a business constitute a “Material Adverse Change” (referred to as a “MAC”) under merger agreements? The answer is important because if the pandemic is a MAC, then buyers can typically walk away from a deal without penalty or legal exposure. On the other hand, if it is not a MAC and buyers try to walk the seller can seek damages and/or seek specific performance of the agreement to force the buyer to close.

The law on MACs

In Canada there is virtually no case law on what constitutes a MAC, so most M&A practitioners look to the jurisprudence from Delaware for assistance (where there are several thoughtful and well-articulated decisions). Not wanting to empower buyer’s remorse at the expense of public shareholders, Delaware courts have been extremely reluctant to find a MAC to have occurred. In fact, there is only one case in which a Delaware court has found a MAC and allowed a buyer to walk from a merger agreement. See our previous blog post for reference.

Although difficult to establish, the case law has focused on two key elements: that the adverse change is “material” and “durationally significant.” Put differently, a MAC needs to be much more than a short-term drop and essentially reflect a fundamental change in the business to be acquired.
Continue Reading COVID-19 and Material Adverse Change Provisions in M&A Agreements

If the Hillary Clinton email scandal wasn’t a clear enough lesson that one should not conduct “official” work using personal electronic communication tools (be it personal email, texts or other methods), a number of recent court decisions have required executives to produce communications from their personal accounts and devices. Executives and advisors should not assume that communications using methods other than corporate email will somehow be protected or otherwise not find the light of day in the event of a dispute or investigation.


Continue Reading Think Before You Send: The Legal Risks of Emails and Text Messages from Personal Accounts

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Where does one draw the line between personal and business? It’s a timeless question, and was also the subject at issue in Koh v Ellipsiz Communications Ltd., 2016 ONSC 7345 (Koh), decided by the Ontario Superior Court of Justice on November 28, 2016.

The facts of the case are these: Ellipsiz Communications