The term standstill agreement refers to various forms of agreements that companies may enter into to delay actions that might otherwise take place. 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. For example, Glencore plc, a Swiss-based commodity trader, and a US-based agricultural commodities trader called Bunge Ltd are part of the standstill agreement. Glencore pursued an informal strategy to acquire Bunge in May 2017. And gradually, the two companies followed the standstill agreement so as not to allow Glencore plc to acquire shares or make a formal elastic offer until a later schedule. A company under pressure from an aggressive bidder or activist investor will find a status quo agreement useful to mitigate the undesirable 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. In other areas of activity, a standstill agreement can be virtually any agreement between the parties in which both agree to suspend the case for a period of time.
This could be an agreement to defer payments intended to help a company survive difficult market conditions, agreements to stop producing a product, agreements between governments, or many other types of agreements. A standstill agreement can be used as a form of defense against a hostile takeover when a target company receives a commitment 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 takeover 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. Some indigenous leaders of the princely states tried to buy time by declaring that they would sign the status quo agreement, but not the instrument of accession, until they had time to decide. In response, the Indian government took the position that it would only sign status quo agreements with states that had acceded to them. [4] By August 15, 1947, the set deadline and date of India`s independence, all but four of India`s princely states, about 560 of them, had signed both the instrument of accession and the status quo agreement with India. The exceptions were Hyderabad, a large state in central South India, which received a two-month extension, and three small states in Gujarat: Junagadh and its subsidiaries (Mangrol and Babariawad). [5] 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 more intrinsic value than the share price reflected. The Nizam of Hyderabad, which had already received a three-month extension to make new arrangements with the Dominion of India, wrote to the Indian government on September 18 that it was ready to conclude an association agreement with India.
But he claimed that membership would lead to unrest and bloodshed in the state. [7] On October 11, Hyderabad sent a delegation to Delhi with a draft status quo agreement, described as “sophisticated” by V. P. Menon, secretary of the Ministry of Foreign Affairs. Minister of State Vallabhbhai Patel rejected any deal that would not fully cede defence and foreign affairs to the Indian government. On the advice of Governor-General Louis Mountbatten, Menon prepared a new draft agreement, which was sent back with the Hyderabad delegation. Nizam`s Executive Council discussed the agreement and approved it by six votes to three. Nizam expressed approval, but delayed the signing of the agreement. [8] On August 15, junagadh state signed the instrument of accession and the status quo agreement with Pakistan. It was adopted by Pakistan on 13 September. [5] Junagadh was the only state to declare its membership in Pakistan before August 15. [6] The draft status quo agreement was formulated on 3 June 1947 by the political department of the Anglo-Indian government.
The agreement provided that all administrative arrangements of “common interest” that existed at the time between the British Crown and a particular signatory state would remain unchanged between the signatory rule (India or Pakistan) and the state until new arrangements were concluded. Issues of common interest have been defined in a separate timetable. During the discussion, Jawaharlal Nehru, India`s future prime minister, doubted that the deal only covers “administrative” issues. Mohammad Ali Jinnah, the future governor-general of Pakistan, expressed his view that this should be the case. [2] Standstill agreements are also used to suspend the usual limitation period for bringing a claim in court. [1] 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 status quo agreement 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 block or stop the process of a hostile takeover if the parties cannot negotiate a friendly agreement. Another type of standstill agreement occurs when two or more parties agree not to deal with other parties in a particular case for a certain period of time. For example, when negotiating a merger or acquisition, the target buyer and potential buyers may agree not to seek out 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. Significantly, the agreement did not provide for the Dominion of India to station Indian forces in the state, while British India had maintained various quarters, particularly in Secunderabad, as part of its “subsidiary alliance” with the state. Over the next 6 months, Indian troops were withdrawn from the state. [15] A status quo agreement was an agreement signed between the newly independent dominions of India and Pakistan and the princely states of the British Indian Empire before their integration into the new dominions. The form of the agreement was bilateral between a dominion and a princely state. It provided that all administrative arrangements that existed at the time between the British Crown and the State would remain unchanged between the signatory rule (India or Pakistan) and the Princely State until new agreements were concluded. [1] The agreement is particularly important since the bidder had access to the confidential financial information of the target company […].