Updated on March 3, 2023
A Standstill agreement is a type of deal or agreement which places certain restrictions on an acquiring company or a lender with respect to some transactions, voting rights or exercising other actions which might impact the target company or target company’s stocks. The agreement is entered into, for preventing any hostile or forceful takeover bid by the stronger party on the basis of any confidential information which it might have access to. The agreement conditions can vary, depending on the two parties, the type of contract and the conditions of the agreement between the said parties.
What are the features of a Standstill Agreement?
Key features of a Standstill agreement are:
a) It is a contract in which one party gives ample time to the other before initiating any legal action in case the said conditions are not met.
b) It prevents the stronger party from making any claim against the other till the contract validity is in force.
c) It can be extended to loans, company takeovers, purchase deals or other similar arrangements.