What Is a Stand Still Agreement

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. 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 is a kind of anti-takeover measure. Specifically, it is a contract that decides how an overbidder of an organization can buy, sell or vote shares of the target unit. If organizations are unable to negotiate a friendly deal, a status quo agreement can completely stop the hostile takeover. The agreement is all the more relevant as the tenderer would have access to the confidential financial information of the target company.

Upon receipt of the potential acquirer`s privilege, the target company has more time to establish additional defenses as part of the acquisition. For certain situations, the target company undertakes to repurchase shares of the target company for a premium in return for the potential purchaser. 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 standstill agreement allows the lender to collect a certain amount of debt. The lender cannot recover anything in the event of foreclosure. If the lender deals with the borrower, he or she may have a better chance of repaying the outstanding loan.

A standstill agreement can practically be an agreement between the parties in which both decide to suspend a particular case for a period of time. It can be an agreement to defer scheduled payments to help a customer overcome difficult market conditions. They may also be agreements to interrupt the production of a product. In 2019, video game retailer GameStop signed a standstill agreement with a group of investors who wanted changes in corporate governance because they believed the company had more intrinsic value than the share price reflected. Common shareholders tend to reject standstill agreements because they limit their potential return on an acquisition. A status quo agreement is an agreement that preserves the status quo. This is an agreement between the target and the bidder that prevents the bidder from submitting a bid to purchase the target company without first obtaining the bidder`s consent. It may be included as a provision in the confidentiality agreement and will be executed prior to receipt of due diligence documents. A standstill agreement aims to prevent hostile bids and provides a possible remedy in the event that the bidder uses confidential information to make a hostile bid in cases where the parties cannot reach an amicable agreement on the terms of sale. The agreement is particularly important because the bidder had access to the target company`s confidential financial information. At the international level, it may be an agreement between countries to maintain the current situation, where the responsibility owed by one to the other is suspended for a certain period of time. A standstill agreement is a form of anti-takeover measure.

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 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. .

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