Mac Clause Facility Agreement

December 12th, 2020 6:23 pm

The controversial nature of the MAC clauses is underlined by recent events in the UK: the vote in support of Brexit has opened a debate on whether a volatile economy or a deep economic event could constitute an MAC. In general, British legal experts widely seem to think that the vote for Brexit is not a MAC. In the case of M-As, an American scientist argued that an economic crisis should not constitute an MAC; Instead, the MAC clauses should explicitly exclude economic downturns. [26] In addition, he argues that (i) the Courts of the United States are correct in setting out the mac clauses in favour of the seller of a business and not the purchaser, and (ii) that this trend would be supported by a reflection on the allocation of risks and by the other options offered by the purchasers to terminate the agreement. [27] This view is further supported by Grupo, in which the Tribunal expressly stated that the concept of “financial situation” does not contain an economic crisis in a MAC clause (see above in Part 4). [28] It is therefore unlikely that an economic crisis itself will influence a court in the same way as other factors that the court will take into account in interpreting a MAC clause. We believe that, in the Canadian context, a MAC clause should instead focus on the specific effects of an economic crisis on the borrower, such as a change in the financial situation or the results of the borrower`s activity. In particular, excluding (rather than usual) economic downturns in MAC clauses is another strategy if the same strategy, which (i) has not been the subject of judicial review and (ii) may be difficult to negotiate. The definition clause – which generally contains a definition of significant negative effects – is customary when a facility agreement contains a definition of essential negative effects.

The B.C. Supreme Court decision in Doman Forest Products Ltd. v. GMAC Commercial Credit Corp. (“Doman Forest”)[1] is the only Canadian case to have interpreted a MAC clause in the funding context. In this case, an MAC has been defined as follows with respect to a delay event: see practical note: significant adverse changes and significant negative effects in the ease of information agreements: whether a MAC clause was triggered by a given event or circumstance generally depends on the drafting of the clause and how it is actually found.

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