Case Summary In Decision Inc Holdings Proprietary Ltd v Garbett [2023] EWCA Civ 1284, the Court of Appeal considered whether the High Court was wrong in ruling that a company had breached a warranty that there had been no material adverse change (MAC) in a target company’s prospects. The Court of Appeal overturned the first instance decision of the High Court, on the basis that the High Court had applied the wrong test for determining if there had been a MAC. The Court of Appeal judgment does not set any new law; however, it provides useful guidance on how the Court will interpret MAC clauses. Background The claim relates to a share purchase agreement (SPA), pursuant to which two individuals (the Sellers) agreed to sell to, Decision Inc Holdings Proprietary Limited (the Buyer), the issued shares in an IT consultancy company, then known as Copperman Consulting Limited (the Company). As part of the due diligence process in the lead up to the parties entering into the SPA in October 2018, the Sellers provided the Buyer with a number of documents which had a bearing on the Company’s financial position. The success of the Company was linked to the continual winning of large and lucrative mandates from clients, meaning that the pipeline documents provided by the Sellers were essential for the Buyer to assess the financial state of the Company. SPECIAL FEATURE 27 Business Buyers Beware When Dealing With A Material Adverse Change Alexander Edwards, partner in Rosling King’s Banking team, reviews a recent case where the Court of Appeal reconsiders the test for determining if a material adverse change (MAC) had occurred within the context of a business acquisition. Furthermore, if there has been a breach of a MAC clause, what practical considerations can we take away from this decision going forward? Written By Alexander Edwards The Court of Appeal judgment does not set any new law; however, it provides useful guidance on how the Court will interpret MAC clauses.
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