What Is a Standstill Agreement

In other areas of activity, a standstill agreement can be virtually any agreement between the parties in which both agree to suspend the case for a period of time. This could be an agreement to defer payments intended to help a company survive difficult market conditions, agreements to stop producing a product, agreements between governments, or many other types of agreements. A status quo agreement is a contract that contains provisions that govern how a bidder of a corporation may buy, sell or vote on shares of the target company. A status quo agreement can effectively block or stop the process of a hostile takeover if the parties cannot negotiate a friendly agreement. Common shareholders tend to reject standstill agreements because they limit their potential return on an acquisition. A status quo agreement may also exist between a lender and a borrower if the lender stops charging a planned payment of interest or principal on a loan to give the borrower time to restructure its liabilities. The bidder`s ability to buy or sell the Company`s shares is limited by these agreements, which gives the Target Company greater scrutiny in this process. A standstill agreement is an agreement between a potential acquirer and a target company that limits the acquirer`s ability to increase its stake in the target company. The agreement can be used to terminate a hostile takeover attempt, usually at the price of a cash payment to the potential acquirer, which includes a repurchase of shares already held by the acquirer at a premium. Or the target company can grant the acquirer a seat on the board of directors if it does not increase its stakes. Status quo agreements exist not only between the two lenders, but can also exist between lenders and borrowers. You can provide the borrower with a period of time during which no payment is required from them so that they can restructure their liabilities. In general, standstill agreements can be used to suspend a transaction for a period of time.

For example, a lender and borrower may agree to suspend debt payments for a certain period of time. A status quo agreement can be reached between governments for better governance. In the banking world, a status quo agreement between a lender and a borrower stops the contractual repayment plan of a non-performing borrower and imposes certain actions that the borrower must take. A status quo agreement was negotiated between India and the newly formed dominions of Pakistan and the princely states of the British Empire of India before being incorporated into the new territories. It was a form of bilateral agreement. A recent example of two companies that have signed such an agreement is Glencore plc, a Swiss-based commodity trader, and Bunge Ltd., an agricultural commodities trader in the United States. In May 2017, Glencore took an informal approach to buying rubber bands. Soon after, the parties agreed to a standstill agreement that prevents Glencore from collecting shares or making a formal offer of rubber band until a later date. What often happens is that one of the lender`s loans is subordinated to the other. In this case, an agreement is made to manage both loans at the same time, one being a primary lender and the other being a subordinated lender.

A standstill agreement provides a target company with different levels of protection and stability in the event of a hostile takeover and promotes an orderly sales process. It is an agreement between the parties not to take further action. A standstill agreement is a form of anti-takeover measure. A standstill agreement is an agreement drafted by the lead lender to ensure that the interests of the animals are protected by the new agreement. They are also known as subordination agreements. In the case of standstill agreements, the parties involved can resolve any issues that may arise before the action and help reduce the likelihood of litigation Status quo agreements can be used to adjust limitation periods. Nowadays, it is not uncommon for standstill agreements to be used to extend or cancel limitation periods. During the standstill period, a new agreement is negotiated, which usually changes the initial repayment schedule of the loan. This is used as an alternative to bankruptcy or foreclosure if the borrower is unable to repay the loan. The standstill agreement allows the lender to recover a portion of the value of the loan. In case of foreclosure, the lender cannot receive anything.

By working with the borrower, the lender can improve their chances of paying off some of the outstanding debt. A standstill agreement can be included in the standard language associated with a confidentiality agreement that a potential bidder must sign for a company before being allowed to view a company`s due diligence documents. By including this clause in the contract, the bidder is prevented from engaging in hostile acquisition activities after the failure of an amicable purchase contract. During the negotiation process, the agreement may also indicate that the different parties cannot conclude agreements with other parties until negotiations are concluded. A standstill agreement protects a company from exposure to an aggressive takeover or activist investor. It also gives the target company the advantage of having more control over the transaction by limiting the bidder`s ability to buy or sell the company`s shares or initiate proxy contests. A standstill agreement may also take place between a lending party and a borrowing party where the lending party does not require timely interest or principal payments to give the borrowing party the opportunity to revise its obligations. In the banking sector, a status quo agreement can allow the borrower to pause the repayment of the loan and ask him to comply with certain guidelines. During the standstill period, an exclusivity contract is negotiated, which ultimately changes the actual debt repayment schedule. It can be used as a substitute for bankruptcy if the borrowing party is unable to repay the loan. This status quo agreement allows the lender to collect a certain amount of debt. .