LEBANON Law and Practice Contributed by: Joseph Nasrallah, Jad Skaff and Yasmina Ballout, HNS Legal
9.4 Directors’ Duties This matter is not applicable in Lebanon. 9.5 Directors’ Ability to “Just Say No” Please refer to 9.2 Directors’ Use of Defensive Meas- ures .
ings, most often arbitration, are usually commenced in the post-closing phase, once the parties begin per - forming the contract and disagreements materialise in practice. 10.3 “Broken-Deal” Disputes The COVID-19 pandemic, combined with Lebanon’s financial crisis, has significantly influenced the drafting of force majeure and material adverse change (MAC) clauses in transaction agreements. Lebanese courts and arbitral tribunals apply a restric - tive interpretation of force majeure, requiring an unforeseeable, irresistible and external event that makes performance impossible. While the pandemic qualified as an external event, its economic and valu - ation effects were generally treated as commercial risk unless epidemics or similar events were expressly covered by the contract. As a result, parties increasingly rely on detailed MAC provisions. Rather than broad “material adverse effect” language, agreements now often include objective financial triggers, such as defined reductions in revenue or EBITDA, in order to allocate risk more clearly between signing and closing. Lebanese law does not recognise a doctrine allow - ing courts to revise a contract merely because per - formance has become excessively onerous. Conse - quently, broken-deal disputes largely depend on the wording of MAC and termination provisions. Shareholder activism is not a significant force in Leba - non. The legal framework does not recognise activist shareholders as a distinct category, and most com - panies are closely held. Following the 2019 amendments to the Code of Commerce, corporate governance principles were strengthened, including equal treatment of sharehold - ers, cancellation of double voting rights, enhanced disclosure obligations, and reinforcement of directors’ duties of loyalty. Shareholder influence therefore oper - 11. Activism 11.1 Shareholder Activism
10. Litigation 10.1 Frequency of Litigation
Court litigation is not a common feature of M&A trans - actions in Lebanon. Disputes arising out of business combinations are more often resolved privately, as transaction documents frequently contain arbitration clauses and the parties generally prefer confidential dispute resolution over public court proceedings. This preference is largely practical. M&A disputes typi - cally concern valuation adjustments, representations and warranties or post-closing obligations, matters that parties consider commercially sensitive. Arbitra - tion allows them to appoint specialised decision-mak - ers, preserve confidentiality and avoid the procedural delays often associated with ordinary litigation. As a result, while judicial challenges are possible in princi - ple, arbitration is usually the primary forum for resolv - ing M&A-related disputes. However, following the Banking Reform Law, disputes follow a different route whereby decisions of the HBC relating to bank restructuring, including imposed mergers, are subject to appeal before a special judicial body which the law provides for but which has not yet been constituted, marking a shift toward specialised administrative litigation for state-mandated deals. 10.2 Stage of Deal When disputes arise, they are rarely brought at the negotiation stage. Parties generally prefer to preserve the transaction and continue discussions rather than initiate formal proceedings while the deal is still being structured. Disputes more commonly appear after signing or fol - lowing closing. They typically relate to breach of rep - resentations and warranties, undisclosed liabilities or non-compete obligations. For that reason, proceed -
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