Material Adverse Change (MAC)

Last Updated: Jun 7, 2019

Created By :

Last Edited By :

Created On :

Material adverse change is applicable to substantial changes in business conditions or prospects of the firm. It could impact the borrower's ability to be funded or acquired. Material changes may include any aspect of the firm as well as its subsidiaries, including:
•Liabilities and assets
•Properties such as intellectual properties and patents
•Process operations
•Market access including foreign markets
•Licenses and leases, such as mining licenses, spectrum licenses and land leases
When an agreement is sought to be nullified on the basis of MAC provisions, in many cases the matter is taken to the courts and the final outcome depends on the interpretation of what constitutes a material adverse change. A material adverse change clause is also used as a measure to cover risk in commercial agreements, such as long-term sale or purchase agreements for products such as power, natural gas and oils, where the adverse events occurring worldwide could affect any of the parties. The aggrieved parties can have a right to ask for changes in the prices or quantities or other conditions of sale/purchase, based on material adverse change provisions in the agreements.