Standstill Agreements in Contracts Explained
What Is a Standstill Agreement?
A standstill agreement is a contract where one party agrees not to take certain actions for a specified period. In the corporate context, it typically prevents a potential acquirer from buying additional shares, launching a hostile takeover, or soliciting proxies without the target company's consent.
Standstill agreements also appear in creditor-debtor relationships, where a lender agrees to pause collection efforts while restructuring is negotiated.
Common Contexts
M&A and corporate transactions:
- A potential buyer signs a standstill as part of gaining access to confidential due diligence materials
- The agreement prevents the buyer from going hostile if friendly negotiations fail
- Typical duration is 6-18 months
Debt restructuring:
- A creditor agrees not to pursue foreclosure or collection while workout terms are negotiated
- Both parties preserve the status quo to allow productive discussions
- Usually shorter duration, 30-90 days
Key Terms to Review
- Scope of restricted actions — What exactly the standstill prohibits (share purchases, proxy solicitations, public statements, board nominations)
- Duration — How long the restrictions last and whether extensions are automatic
- Fall-away provisions — Events that terminate the standstill early, such as the target agreeing to a deal with another party
- Don't ask, don't waive (DADW) — Prevents the restricted party from even requesting a waiver of the standstill, which courts have scrutinized in recent years
- Permitted actions — Carve-outs for activities that are still allowed
When to Consult a Lawyer
Standstill agreements have significant strategic implications. Consider consulting corporate counsel before signing one, particularly regarding fall-away provisions and whether a DADW restriction is appropriate given your position.
This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.