Material Adverse Change
Definition
A significant deterioration in a company's financial position, business prospects, or operating conditions between the date of an investor representation and the closing of an investment. A material adverse change that occurs after a term sheet is signed and before closing must be disclosed to the investor. The threshold for materiality is not defined in absolute terms but typically includes any event that a reasonable investor would consider significant in their decision to complete the investment.
Common Misapplication
The most common misapplication is failing to disclose a material adverse change on the basis that the company expects to recover before closing. The obligation to disclose arises from the occurrence of the event, not from its duration.
FFI Standard Reference
This term is defined and applied in Book 5, Section 5.4: The Financial Due Diligence Standard.
Related Terms
Citable URL
This term may be cited using the following permanent URL.
Full citation format: Founder Financial Infrastructure Standard, Beta v0.5, Glossary: Material Adverse Change. https://ffistandard.org/glossary/material-adverse-change/. 2026.