Business Transactions During COVID
Nadia Kettani discusses the impact COVID has had on business transactions in her jurisdiction and shares how the pandemic has impacted this area of law.
With Morocco, like the rest of the world, seeing restrictive measures being put in place at the last minute, Nadia discusses whether the grounds for terminating a deal and the delays at hand.
- What issues should sellers anticipate when closing a transaction during the pandemic?
Ever since the beginning of the pandemic in Morocco, the Moroccan government is continuously adapting lockdown and curfew requirement orders depending on each city’s level of COVID-19 contamination. The government’s regulations in regards to the pandemic are constantly amended and the country is in a state of public health emergency until 10 January 2021, which may be extended beyond this date. Therefore, the issues to be anticipated may vary from one city to another, especially Casablanca which has seen the restrictive measures extended as of December 18th 2020, for four extra weeks.
The main issues to anticipate when closing a transaction during the pandemic in Morocco are in connection to the public administrations. The process to obtain legal/regulatory permits/authorisations (if needed), as well as, the documents/signatures certification may take a significant amount of time compared to before the pandemic, since (i) most of the Moroccan public administrations require nowadays the submission of the documentation online, (ii) it imposes the obligations to obtain an appointment, and/or (iii) the number of the administration’s officials has been drastically reduced due to the contamination.
While general force majeure or unforeseen circumstances are not usually common in M&A, it is possible that this will change in future documentation. However, the draft of the clause will need still to be restricted.
- Can buyers walk away from their deal? What are the potential grounds for renegotiation or termination?
If potential buyers have not entered into binding offers or contractual documents, they may well walk away from the deal. However, if they have concluded agreements or executed binding offers and especially during the pandemic, it will be more difficult to walk away from the deal.
In any case, there is room for renegotiation while termination may be more difficult and will depend on the agreements signed.
- General force majeure or unforeseen circumstances clauses are not usually common in M&A transactions. Do you think this will change?
While general force majeure or unforeseen circumstances are not usually common in M&A, it is possible that this will change in future documentation. However, the draft of the clause will need still to be restricted. It will be debatable in my view.
- How will complying with pre-closing covenants change during this time?
Unless the country is once again under full lockdown (the characteristics of which may differ from city to city) the concerned parties must conduct their businesses and operate and maintain their activity in the ordinary course of business, consistent with past practice and use commercially reasonable efforts to preserve intact their current business organisations and preserve their relationships with customers, tenants, suppliers, advertisers and others having business dealings with it, as the case may be. Otherwise, the party affected by the consequences of the lockdown should immediately inform the other party of the difficulties it is facing and its ability or not to comply with the agreed upon pre-closing covenants.
- Will the bring-down of representations and warranties at closing require increased efforts by sellers?
We do not consider that it is the case unless it relates to documents being obtained by local administrations as mentioned in question 1 above.
- Have there been delays in the satisfaction of closing conditions and formalities during such transactions? How does this impact the M&A market overall?
The M&A market was, as expected, mostly on hold during the full lockdown in Morocco. Currently, M&A related transactions, negotiations and offers have resumed.
- How can the drafting of the pre-completion undertakings help during uncertain times?
Pre-completion undertakings may help comfort the benefiting party during uncertain times. However, it is important to assess the concerned party’s ability to comply with those undertakings. Having both parties work together to surpass any difficulties the target or the purchaser may face during uncertain times, is a good strategy which would also allow the seller to easily gun jump and share competitive-sensitive information if pre-completion undertakings are applicable to the purchaser.
- What would you advise companies to approach transactions (buyer and seller) during this time?
We advise to take into consideration the abovementioned issues and contact a knowledgeable local law firm to avoid any unforeseen delays or issues.
- What should they look out for, to ensure they are making the right decision?
As mentioned previously, it is important to analyse each transaction on a case by case basis and have a legal counsel assist the parties at all time.
Nadia Kettani joined Kettani Law Firm as a senior partner in 1992 and is in charge of the firm’s Consulting department.
The Azzedine Kettani law firm which was created in 1971 is since 2011 the first SCP of lawyers in Casablanca under the name of KETTANI LAW FIRM (KLF) SCP.
KLF is the largest independent Moroccan law firm: it has 120 employees at its headquarters in Casablanca.
KLF is divided into four poles:
- Dedicated structures