April 8, 2021

Define Standstill Agreement

Filed under: Uncategorized — dpk3000 @ 11:00 pm

Ordinary shareholders tend not to like status quo agreements because they limit the potential returns of a buyout. A status quo agreement can be practically an agreement between the parties, in which both parties decide to suspend a specific issue for a specified date. This may be an agreement to defer payments to help a customer overcome strict market conditions. It can also be agreements to stop the production of a product. A status quo agreement can be used as a form of defence of a hostile takeover when a target company receives a commitment from a hostile bidder to limit the amount of shares it buys or holds in the target company. By committing to the promise of the potential acquirer, the target company saves more time to set up new takeover defenses. In many cases, the target company promises in return to repurchase the equity holdings of the potential purchaser for the purpose of an increase. A status quo agreement provides different levels of protection and stability to a target company in the event of hostile adoption and promotes an orderly sales process. It refers to an agreement between the parties not to take further action. The concept of a status quo agreement refers to different forms of agreements that companies can enter into to delay actions that could be taken otherwise. The agreement is particularly important as the bidder has had access to the confidential financial information of the entity concerned.

Prior to their accession to the new territories, a status quo agreement was negotiated between India and Densern and the princely states of the British Indian Empire. It was a bilateral form of the agreement. A company that is pressured by an aggressive bidder or activist investor believes that a status quo agreement is useful in weakening the unsolicited approach. The agreement gives the target entity greater control over the deal process by requiring the bidder or investor to buy or sell the company`s shares or launch proxy contests. A status quo agreement can be reached between a lender and a borrower. It gives the borrower time to restructure its debts. On the other hand, the lender provides for a certain moratorium on the payment of interest or principal loans. A status quo agreement between a bank and a borrower operates in lines similar to those shown above. It suspends the contractual repayment plan of a stressed borrower and imposes certain conditions on the borrower. A status quo agreement is an agreement that preserves the status quo.

It is an agreement between the objective and the bidder that prevents the bidder from making an offer to purchase the target without first obtaining its approval. It can be added as a provision in the confidentiality agreement and will be executed before obtaining due diligence material. A status quo agreement aims to prevent hostile bids and provides a possible remedy in case the bidder uses confidential information to make a hostile offer if the parties fail to reach a mutual agreement on the terms of sale. The agreement is particularly relevant because the bidder would have access to the confidential financial information of the entity concerned. After receiving the commitment of the potential purchaser, the target entity has more time to set up additional defence facilities for the acquisition. In some situations, the target entity agrees to repurchase shares of the target with a premium in return for the potential purchaser. In 2019, video game distributor GameStop signed a status quo agreement with a group of investors who wanted changes in corporate governance, believing that the company had intrinsic value when the share price reflected. A recent example of two companies that have signed such an agreement is Glencore plc, a Commodities trader based in Switzerland, and Bunge Ltd, an American agricultural commodities trader.

In May 2017, Glencore took an informal step to buy Bunge.