BAHAMAS Law and Practice Contributed by: Michelle Neville-Clarke, Lethea Carey and Stan Burnside, Lennox Paton
10. Litigation 10.1 Frequency of Litigation
rights must also demonstrate compliance with mitiga - tion and notice obligations: reasonable steps to limit the adverse effect must be taken and notice provi - sions must be observed promptly and with specificity, as failure to do so can nullify a claim even when the underlying event is serious. Specific performance claims carry additional practical risks for sellers. Even if a court orders a buyer to close, enforcement may be frustrated if third-party financ - ing collapses due to separate MAC triggers within the buyer’s lending arrangements, highlighting the com - plex interplay of financial and contractual factors in MAC disputes. Emerging trends in The Bahamas indicate a push toward greater precision and predictability in MAC clauses. Pandemic carve-outs and “acts of govern - ment” exclusions are increasingly incorporated to reduce ambiguity, while the “disproportionate effect” standard is used to trigger MACs only where the impact on the target is materially worse than that of industry peers. MAC provisions are also increasingly viewed as renegotiation tools rather than absolute exit rights, enabling adjustments to price or the implemen - tation of earn-outs to bridge valuation gaps caused by extraordinary circumstances. Disputes frequently focus on whether a seller’s pan - demic-related actions (such as temporary closures or workforce reductions) breached covenants to operate in the ordinary course of business. Bahamian juris - prudence continues to emphasise the alignment of operational decisions with contractual frameworks governing business conduct during extraordinary events, reinforcing the need for careful drafting and clear standards in MAC clauses.
In the Bahamas, litigation is not considered prevalent in the majority of M&A transactions, as dealmakers often prefer alternative dispute resolution methods such as arbitration or mediation. However, litigation remains a critical risk factor and the Bahamian courts are frequently involved in high-profile or complex cross-border proceedings. 10.2 Stage of Deal In The Bahamas, pre-closing proceedings are typically interlocutory, with parties seeking interim injunctions to prevent or delay a transaction and preserve the status quo while disputes are resolved. Post-closing disputes usually involve the interpretation and per - formance of contractual obligations, including the fulfilment of covenants, price adjustments such as earnouts and accounting methods. Claims may also arise from material misrepresentations discovered after closing, though unwinding a completed merger is legally complex and costly. Common triggers for litigation include shareholder actions, particularly minority oppression claims, asset recovery through liquidation or receivership and regu - latory challenges arising when transactions proceed without required approvals, prompting enforcement or intervention by authorities or affected parties. 10.3 “Broken-Deal” Disputes In The Bahamas, the COVID-19 pandemic significantly reshaped the treatment of Material Adverse Change (MAC) and Material Adverse Effect (MAE) clauses, elevating them from routine boilerplate to transaction- specific provisions subject to detailed scrutiny. Courts generally reject the notion that standard MAC or force majeure language provides a catch-all remedy. Enforceability depends on precise drafting and align - ment with the particular transaction; generic wording alone is rarely sufficient. A key consideration is the materiality standard. Relief under a MAC typically requires showing that the event caused a substantial, enduring diminution of the tar - get’s long-term earnings potential, rather than a tem - porary or transient disruption. Parties invoking MAC
11. Activism 11.1 Shareholder Activism
Shareholder activism in The Bahamas is an evolving but not yet dominant force. While it is not as aggres - sive as in the U.S., it is gaining traction as investors increasingly focus on governance and transparency. Following legislative amendments in 2020, there is a strong focus on empowering minority shareholders to
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