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Impact of COVID-19 on M&A transactions


On 29 April 2020, the Netherlands Commercial Court (NCC) ruled on a first case in the Netherlands where termination of an M&A transaction was sought due to the current COVID-19 circumstances. We refer to our newsflash of 11 May 2020.

In a new case, a summary judge of the Amsterdam District Court ruled on 14 May 2020 that Nordian Capital should proceed with signing a share purchase agreement (SPA) with J-Club. The summary judge ruled in this case after hearings were held through Skype for Business.


In October 2019, the owners of J-Club (the claimant) reached out to 22 parties for a potential management buy-out of J-Club. Nordian Capital (the defendant), after issuing an indicative offer and subsequently a binding offer, was selected as the preferred bidder.

Negotiations on the SPA took place between parties on 26 and 27 February 2020. Parties discussed COVID-19 during these meetings, and agreed to not include an MAC-clause or specific clauses relating to COVID-19 in the SPA. Following these negotiations, a signing protocol was signed on 28 February 2020, to which document an agreed form SPA was attached. 

Signing Protocol: W&I insurance condition

In the signing protocol parties committed to signing the SPA, subject to the condition of Nordian Capital obtaining W&I insurance. In order to obtain such insurance Nordian Capital committed to use its best efforts to do so as soon as possible following the signing of the signing protocol. 

Although Nordian Capital indicated to the owners of J-Club on several occasions that they expected to obtain W&I insurance on a short notice, on 19 March 2020 they issued a letter stating that efforts to obtain W&I insurance were suspended in order to further assess the implications of COVID-19 on J-Club and the contemplated transaction. 

Unforeseen circumstances

In the letter of 19 March 2020 Nordian Capital also stated that based on the doctrine of reasonableness and fairness, it considered the W&I insurance condition as included in the signing protocol not to be  fulfilled, and by stating that COVID-19 is exactly an event the Dutch legislator had in mind when drafting the clause on unforeseen circumstances (article 6:258 Dutch Civil Code). This article states that at the request of a party to an agreement, the court may change the legal effects of that agreement (or it may dissolve the agreement in full or in part), if the other party to that agreement may not expect an unchanged continuation of that agreement by the requesting party, due to unforeseen circumstances which, according to standards of reasonableness and fairness, do not justify an unchanged continuation of the agreement. This leads to Nordian Capital’s conclusion that J-Club cannot reasonably expect the Signing Protocol to remain unaltered or be enforced unaltered, and therefore, the SPA to be signed under the current circumstances. 

Decision summary judge

As obtaining W&I insurance was the only condition in the signing protocol for signing of the SPA, the owners of J-Club lodged court proceedings requesting the court to rule that Nordian Capital should proceed with signing the SPA. The court ruled in line with the arguments brought forward by the owners of J-Club by concluding that Nordian Capital did not use its best efforts to obtain W&I insurance, therefore regards the W&I insurance condition to be deemed fulfilled, and rules that the SPA should be signed. The fact that parties discussed the potential impact of COVID-19 during their meetings on 26 and 27 February 2020, during which time COVID-19 infections were already registered in various European countries, and as a conclusion of which meetings no MAC-clause or any other specific COVID-19 clause or condition was included in the agreed form SPA, Nordian Capital did not properly substantiate that COVID-19 should be considered as an unforeseen circumstance leading to an adjustment or dissolvement (in whole or in part) of the signing protocol or the agreed form SPA.

Execution transaction: financing condition SPA

The court also noted that fulfilment of the W&I insurance condition only obligates Nordian Capital to sign the SPA, and does not relate to the actual execution of the transaction. Although Nordian Capital tried to argument that the Finance Condition included in the SPA shall not be fulfilled as no credit provider will provide financing for the transaction under the current market circumstances, the court is of the opinion that when the SPA is signed, Nordian Capital has the responsibility to actively try to obtain financing for execution of the transaction. In light thereof, the long stop date for obtaining financing for this transaction as included in the agreed form SPA has been extended by the court to 1 September 2020.

For more information on this ruling and insight into this case, contact your regular CMS advisors.


Portrait of Mark Ziekman
Mark Ziekman
Portrait of Robert Jong
Robert Jong