Types of Standstill Agreement and its Key Terms A standstill agreement indicates a variety of agreement forms that businesses can require for delaying action that might take place. This legal agreement can provide many levels of protection as well as stability to a targeted firm in an unfriendly takeover. It also encourages an orderly sale process. This agreement refers to the contract between the parties for refraining from taking any further action. Usually, shareholders do not like standstill agreement because it restricts the potential returns from an acquisition. There are other types of this legal agreement which comes into the picture when two or more than two parties do not get agreed to deal with another party in a particular matter for a specific period. Standstill agreement is also useful for suspending the usual period of limitations to bring a claim in the court.
What is a standstill agreement? A standstill agreement is a legal agreement between business entities and their shareholders for defending the organization in situations like for preventing the stakeholder from obtaining further shares as well as preventing a hostile acquisition try or even for avoiding the organization from litigation by its shareholders.
Moreover, an organization can use the standstill agreement for limiting the shareholder's influence and, therefore, detested by shareholders as this agreement has the potential for impairing their return on investment. This agreement needs to be productive, and this is the reason that it consists of the clauses about rights of an organization as well as its stakeholders, the mutually agreed terms and conditions, the privileges offered by an organization to its shareholders for restricting their actions, etc.
Key Terms of a Standstill Agreement ∙ ∙ ∙
It is an agreement which consists of provisions that dictate how an organization’s bidder can dispose of, purchase, or voting stock of the target organization. It can effectively stop or stall the hostile takeover process when the parties are not able to do a friendly deal. An organization finds this agreement useful to blunt the unsolicited method when it faces pressure from an activist investor or aggressive bidder.