Simpson Oil Limited (SOL) sought a ruling on whether changes in Parkland’s senior management triggered a Material Adverse Change (MAC) clause in the Governance Agreement, thereby lifting restrictions on its rights regarding Parkland shares.
The dispute centered on whether specific events listed in the MAC definition were automatic triggers or merely illustrative.
Background
In 2019, SOL sold 75% of Sol Investments Limited (SIL) to Parkland, later selling the remaining 25% in 2022. In return, SOL received shares, making it Parkland’s largest shareholder.
The Governance Agreement restricted SOL’s ability to vote its shares or acquire more, unless a MAC occurred.
The MAC definition stated it "shall include":
A replacement of a majority of Parkland’s board within three months.
A material change in senior management (excluding title changes).
SOL argued that the resignation of its CFO and 8 out of 10 senior executives constituted a MAC.
Court’s Decision
The court ruled that MAC events in the agreement were mandatory triggers, requiring no additional proof of financial harm.
The significant turnover in senior management met the definition of a MAC.
Result: The restrictions on SOL’s voting rights and acquisitions were lifted.
Key Takeaways
Clear contract language prevails; investor restrictions can be lifted upon predefined MAC events.
MAC clauses in governance agreements are rare, but courts will enforce them if explicitly drafted.
