Clarity on material adverse change

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Material adverse change can be key to commercial agreements but has not been clearly defined under Chinese law. A recent Supreme People's Court interpretation has changed that

Material adverse change (MAC), in the context of mergers and acquisitions or other commercial transactions, is normally defined as an event that is seriously detrimental to various aspects of a target asset or target company. A typical MAC clause in a commercial agreement reads as follows:

Material Adverse Change means any event, change, effect or occurrence that, individually or together with any other event, change, effect or occurrence, is or could reasonably be expected to be materially adverse to the business, operations, assets or liabilities, prospects, results or the conditions (financial or otherwise) of the Target Company and its subsidiaries individually and/or taken as a whole.

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