A status quo agreement between a bank and a borrower works in the same way as the above. It stops the contractual repayment plan for a stressed borrower and imposes certain conditions on the borrower. A standstill agreement can practically be an agreement between the parties in which both decide to suspend a particular issue for a certain period of time. It can be an agreement to defer scheduled payments to help a customer overcome difficult market conditions. Agreements may also be made to interrupt the production of a product. In other areas of activity, a standstill agreement can be virtually any agreement between the parties in which both agree to hold the case for a period of time. A standstill agreement tends to favour the existing management team over the rights of shareholders, who might otherwise benefit from a buyback offer that increases the value of their shares. A standstill agreement can be contained in the standardized 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 agreement, the bidder is prevented from engaging in hostile acquisition activities after the failure of a friendly purchase agreement. In 2019, video game retailer GameStop signed a standstill agreement with a group of investors who wanted changes in corporate governance, believing the company had higher intrinsic value than that reflected in the share price.
A new agreement is negotiated during the standstill period, 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 contract 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 stop or stop the process of a hostile takeover if the parties cannot negotiate a friendly 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. Shortly thereafter, the parties agreed to a standstill agreement that prevents Glencore from accumulating shares or making a formal offer of rubber band until a later date. The agreement is relevant in particular because the tenderer would have access to the confidential financial information of the target company. Upon receipt of the privilege from the potential acquirer, the target company has more time to build up further defenses for 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 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. 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 standstill agreement is a form of anti-takeover measure. As a defense against hostile takeovers, the target company may receive a promise from a hostile bidder to limit the amount of shares the bidder can buy or hold in the target company.
This gives the target company time to build other defense strategies against acquisitions. In return, the target company can buy back the shares of the potential acquirer of the target company at a premium. The target company may offer a different incentive, e.B a seat on the board of directors. A standstill agreement can also be an agreement between the parties not to negotiate with other parties during negotiations between them for a certain period of time. It can also be used as an alternative to bankruptcy or foreclosure. A status quo agreement is an agreement that preserves the status quo. This is an agreement between the objective and the bidder that prevents the bidder from submitting an offer to purchase the target 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 if the parties fail to reach a mutual agreement on the terms of sale. 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. The term standstill agreement refers to various forms of agreements that companies may enter into to delay actions that might otherwise take place. A status quo agreement was negotiated between the newly formed dominions of India and Pakistan and the princely states of the British Empire of India before they were incorporated into the new territories. It was a form of bilateral agreement. 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 can be used as a form of defense against a hostile takeover when a target company receives a promise from a hostile bidder to limit the amount of shares the offeror buys or holds in the target company. By soliciting the promise of the potential buyer, the target company saves more time to build other acquisition defenses. In many cases, the target company promises in return to buy back the shares of the potential acquirer of the target company at a premium. A company under pressure from an aggressive bidder or activist investor will find a status quo agreement useful to mitigate the unsolicited approach.
The agreement gives the target company more control over the transaction process by requiring the bidder or investor to have the opportunity to buy or sell the company`s shares or launch proxy contests. Another type of standstill agreement occurs when two or more parties agree not to negotiate with other parties on a particular issue for a certain period of time. For example, when negotiating a merger or acquisition, the target and potential buyer may each agree not to solicit or participate in acquisitions with other parties. The agreement increases incentives for the parties to invest in negotiations and due diligence, while respecting their own potential activities. 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. .
