Standstill Agreement Example

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. 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 status quo agreement is a form of anti-support measure. 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. 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. Shortly thereafter, the parties agreed to a status quo agreement that prevents Glencore from accumulating shares or making a formal offer for Bunge until a later date. During the status quo period, a new agreement is negotiated, which generally changes the original loan repayment plan. This option is used as an alternative to bankruptcy or enforced execution if the borrower cannot repay the loan. The status quo agreement allows the lender to save some value from the loan. In the event of forced execution, the lender must receive nothing. By working with the borrower, the lender can improve its chances of repaying some of the outstanding debt.

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. 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. In banking, a status quo agreement between a lender and a borrower terminates the contractual repayment plan of a struggling borrower and imposes certain steps that the borrower must take.