Material Adverse Change (MAC) and Material Adverse Effect (MAE) clauses have become pivotal in the negotiation and litigation of commercial contracts. These clauses are designed to protect buyers from unforeseen events that significantly impact the target business. Recent decisions by the UK High Court have provided valuable insights into the interpretation and enforceability of these clauses, shaping the legal landscape for corporate transactions. Summary of BM Brazil v Sibanye: the “Revelatory Event” case In the landmark 2025 High Court case of BM Brazil v Sibanye, the court examined whether a geotechnical event at the Santa Rita mine constituted a MAE under the SPA. In this case, the buyer purchased the Santa Rita Nickel mine in Brazil for over 1 billion dollars. There was a triggering geotechnical event, in that a portion of rock was displaced meaning that the seller was forced to undertake remediation events. The seller subsequently tried to argue that the event had a significant and lasting impact on the value and operations of the mine, thereby triggering the MAE clause and sought to terminate the SPA. However, the Court held that the clause had not been triggered, emphasising the need for clear and compelling evidence of materiality. This case introduced the concept of a ‘revelatory event’ (i.e., whether the clause covered events that revealed deeper issues and clarified that such events must meet a high threshold to qualify as materially adverse). Interpretation of Material Adverse Change and Material Adverse Effect clauses in Share Purchase Agreements There is no standard definition for MAC/MAE clauses in English law. Courts generally interpret these clauses narrowly, requiring demonstrable and enduring adverse effects on the target business. The burden of proof lies with the party seeking to invoke the clause and courts are reluctant to allow termination of agreements based on speculative or temporary changes. Practical implications for drafting and negotiation The evolving case law has significant implications for how MAC/MAE clauses are drafted and negotiated. Buyers should seek precise language that defines what constitutes a material adverse change, including financial thresholds and specific events. Clear and significant adverse impacts are required in the drafting, not just the revelation of potential risks. What does this mean going forward? Recent UK High Court decisions have reinforced the importance of clarity and specificity in MAC/MAE clauses. As these clauses continue to play a critical role in SPAs, it is vital to ensure that contractual language reflects the parties’ intentions. The case of BM Brazil v Sibanye serves as a benchmark for future disputes, highlighting the rigorous standards applied by courts in assessing materiality. How Morr & Co can help? If you have any questions or would like any further information on the content of this article, please do not hesitate to contact our Corporate and Commercial law team on 0333 038 9100 or email info@morrlaw.com and a member of our expert team will get back to you. Disclaimer Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position. Authored by Louise Fegan Partner Message Tags Insights Corporate Insights On this page Contact our team today to find out more get in touch
