Fayetteville District | Standstill Agreement Law
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Standstill Agreement Law

Standstill Agreement Law

While the standstill agreement was found to be effective in this action, Mostyn J. criticized the effectiveness of status quo agreements in general. He commented: “It is not the part of the party to give time that belongs to the court” and suggested that “this is a practice that should stop immediately”. This has led to an understandable concern that status quo agreements may not be effective. Consequently, the applicants and their lawyers were reluctant to conclude a standstill agreement and preferred to initiate safeguard proceedings. In 2019, video game distributor GameStop signed a standstill agreement with a group of investors who wanted changes in the company`s governance, believing the company had an intrinsic value greater than what the share price reflected. Under the Limitation Act 1980, legal proceedings must be commenced within specified time limits, but if it is not reasonable or inexpensive, for any reason, to initiate proceedings within that period, the parties may agree, by a standstill agreement, not to adopt them and, if they need them later, not to be prevented by the limitation period otherwise in force. The agreement consists in extending or suspending the limitation period, without the Contracting Parties raising the limitation period as a matter. Some commentators argued that this was indeed a “storm in a cup of tea,” and they were right; the decision was overturned in July on appeal (Cowan v.

Foreman, EWCA Civ 1336 2019). While an extension of the limitation period is left to the discretion of the Tribunal, it is open to the parties, as always, and it is likely that the courts will abide by the agreement. While standstill agreements may still be considered a last resort, they are, in certain circumstances, an appropriate option. Nevertheless, the case warns of the risks associated with these agreements and highlights the importance of carefully considered legal elaboration. It is therefore essential to have specialist legal advice to ensure that standstill agreements are concluded appropriately and that the conditions are effectively formulated. Last February, in Cowan vs. Foreman (2019 WEHC 349 Fam), Justice Mostyn stated that he opposed status quo agreements related to estates and called for an end to their use. In this case, it denied in a timely manner the surviving spouse`s request for a provision under the law, depending on the parties having entered into a standstill agreement. A status quo agreement may also exist between a lender and a borrower if the lender stops requiring a planned payment of interest or principal for a loan, in order to give the borrower time to restructure their debts. The case arises from an application for leave to apply under the 1975 Act (hereinafter the Succession Act).

Section 4 provides that an application to that effect may be made only with the authorisation of the Tribunal at the end of the applicable statutory limitation period. The parties entered into a standstill agreement and the claim was ultimately made without the Tribunal`s consent after the statutory limitation period had expired. A standstill agreement can be used as a form of defense against a hostile acquisition when a target company obtains a promise from an unwelcoming bidder to limit the amount of shares the bidder buys or holds in the target company. By recovering the promise of the potential buyer, the target company will gain more time to set up other acquisition defenses. In many cases, the target company promises to buy back with a premium the stock of shares of the potential acquirer in the target company. During the standstill period, a new agreement is negotiated, which usually changes the initial repayment plan of the loan. This is used as an alternative to bankruptcy or enforcement if the borrower cannot repay the loan….

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