Post-Closing Price Adjustments: Playing With Fire

The deal has closed and the shares have transferred. However, the agreement notes the possibility of a post-closing price adjustment for adjustments discovered before a deadline, but there is no adjustment formula or mechanism in the agreement. How should this process unfold?

The Saskatchewan Court of Appeal recently considered this question when it upheld a trial decision that found no adjustments were warranted in the case of Niebergal v QHR Technologies Inc., 2020 SKQB 327 (Trial Decision) and 2022 SKCA 85 (Appeal Decision).

QHR and Clinicare

In this case, the purchaser, QHR, issued promissory notes in partial payment for its shares of Clinicare as set out in a share purchase agreement ("SPA"). Following the close, QHR eventually advanced adjustments pursuant to a price adjustment clause ("PAC") to the effect that none of the amounts in the promissory notes remained owing. This amounted to an approximate 20% reduction in share value from the amount