We await further clarification on the MAC clauses by the Canadian, American and British courts. In the meantime, lenders should exercise caution when relying on MAC clauses or considering demanding repayment of a loan. MAC clauses and events leading to the MAC are carefully considered by the courts. Creditors should therefore ensure that other robust safeguards are built into credit agreements to ensure the protection of their right to declare a default and to accelerate a loan. The most important case in the M&A context is in re IBP Shareholder Litigation, 789 A.2d 14 (Del Ch. 2001), involving an acquirer who referred to a MAC clause to terminate a transaction. IBP states that the traditional principles of contract law apply to MAC disputes and that courts “should attach great importance to the objective manifestations of the parties in the written language of their agreement”. 2, to 54. It is equally important that the IBP court consider the entire contract according to the situation and circumstances that exist at the time of its creation. To that end, creditors should receive as much financial information as possible from the borrower, including, where necessary, through their credit agreement information rights. They should also try to understand the source of funds from which the borrower wishes to repay the loan, given that a borrower who relies exclusively on business profits is more likely to have undergone a significant negative change than a borrower with considerable cash reserves. Finally, it is important for lenders to keep abreast of the financial assistance the government is offering to businesses struggling with COVID-19, as this may be enough to produce an intangible detrimental effect that would otherwise be essential. Mandate and commitment declarations are agreements signed by lenders in order to guarantee the future borrower the financial support necessary to conclude a transaction (usually a business acquisition) until negotiations with the counterparty or in the phase between the signing and the conclusion of the transaction.
In Akorn, Inc. v. Fresenius Kabi AG, no. 2018-0300-JTL, 2018 Del. Ch. LEXIS 325, *123u201224 (Del. . .