Standstill Agreement Banking

From this point of view, there is no established jersey practice of the status quo between a creditor and a debtor, and there is no case law on this point. However, given the very important weight that contributes to the maintenance of contractual agreements between parties in Jersey (according to the customary maxim of the agreement makes the parties law), there does not appear to be any reason why a status quo agreement should not be feasible in this context. In the event of a delay in a loan agreement or if it is likely that this will occur in the future due to payment constraints for the company, the company and its creditors may enter into a status quo agreement to suspend either the creditor`s performance rights (if the late payment has already occurred) or the payment obligations (if the default occurs in the near future). This is a fully consensual private contractual agreement between the creditors and the debtor company. 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. 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. What often happens is that one of the lender`s loans is subordinated to the other. In this case, an agreement is developed to manage both loans at the same time, one being a priority lender and a subordinated lender. Status quo agreements could also take other steps to protect the company.

You can set a deadline. B during which the bidder cannot attempt to obtain the acquisition. This term is generally used in three quite different contexts: (i) in certain acquisition situations where a company and a shareholder agree to limit the shareholder`s ability to acquire other stakes in the company; (ii) in the context of agreements to suspend or extend the statute of limitations for different types of rights; and (iii) in a restructuring context in which a private agreement has been reached between the creditors and the debtor company. It is the latter form of status quo agreement that is discussed in this article. A status quo agreement can be reached between governments for better governance. 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. Ultimately, the impasse is a form of pragmatic compromise between the company and its creditors: the parties can enter into leniency agreements that provide for a moratorium on payments to creditors. From the point of view of the debtor company, the decisive question is whether its medium- and long-term business prospects are strong after the restructuring. A status quo agreement can reassure directors that it is appropriate for the business to continue trading and that there is a reasonable prospect that the business will survive.

This article also discusses the legal mechanics of using these tools in each of the most important offshore jurisdictions where Appleby provides legal advice. It is important to remember that the potential consequences of a status quo agreement and the benefits of such an agreement for a company or its creditors, as well as the effects of a moratorium, must be carefully considered on a case-by-case basis. With respect to status quo agreements, the impact may also be different on a “document-by-document” basis if the specific drafting of debt securities is taken into account.

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