This article is authored by Nidhi Bajaj, of Guru Nanak Dev University, Amritsar, Punjab. This article seeks to highlight the meaning and important elements of a standstill agreement including its form and general features. Further, it also discusses the usage and advantages of standstill agreement. 

This article has been published by Sneha Mahawar.


As the term ‘standstill’ literally suggests, standstill agreements permit the parties to maintain the status quo about a particular matter. A standstill agreement is a contract that restricts or suspends the actions of one or more parties in a contractual arrangement for a specified period. Standstill agreements have become fairly common these days and can be an effective tool in matters of civil litigation as the parties may agree to suspend or extend the limitation period by entering into a standstill agreement.

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With the onset of the COVID-19 pandemic, the whole world came to a temporary standstill and the post-pandemic world is still trying to adjust to the new normal which is marked by economic uncertainty. In such circumstances, companies must give serious thought to incorporating standstill agreements in their business practices.

This article will focus on explaining the meaning, general applications of the standstill agreement, and the various issues that need to be considered while drafting a standstill agreement.

What is a standstill agreement

As mentioned above, a standstill agreement is an agreement that restricts a party from doing something or from taking an action for a certain period. It requires the party(ies) to ‘stand still’ about a particular matter. However, this might mean a bunch of different things, depending upon the context and purpose:-

  • Parties can enter into a standstill agreement for suspending or extending a statutory or contractual limitation period for various types of claims.
  • In a takeover situation, a company may enter into a standstill agreement with a shareholder, restricting the shareholder’s ability to acquire further shares in the company or suspending his right to buy more shares till a certain date.
  • In the context of restructuring, a standstill agreement is entered into between the debtor company and the creditors whereby the right of the participating creditors to enforce their debts is suspended for a certain period on certain specified terms. The creditors agree that they will not take any action for enforcing their debts for a certain period in which information can be collected and a survival strategy can be formulated to implement a formal restructuring.

Example of a standstill agreement

A recent example of two companies entering into a standstill agreement is that of Glencore PLC and Bunge Ltd. Glencore PLC is a Swiss-based commodities trader and Bunge Ltd. is a U.S. agricultural commodities trader. In May, 2017, Glencore approached Bunge Ltd. about a takeover. Shortly after, a standstill agreement was signed between the two companies that temporarily prevented Glencore Ltd. from making a hostile bid for Bunge Ltd. until a later date.

Elements of a standstill agreement

A standstill agreement must be complete in all respects for it to have a binding effect. The important elements of a standstill agreement are mentioned below:


A standstill agreement may include two or more parties. The names and the details of the parties who have agreed to the contract must be mentioned.


The reasons or purpose of the agreement are usually mentioned in the agreement.

Time frame

A standstill agreement must mention the date on which it takes effect and the date of its termination.


This constitutes the longest part of the agreement and includes all the important clauses, conditions that bind the parties, and also sets out the expectations and requirements of the parties involved.


When does the standstill agreement end? This is a crucial question as the further course of action to be taken by parties depends on it. The agreement should clearly mention the mode or ways or the event or circumstance on the happening of which the standstill agreement will come to an end. This might be on completion of a certain duration, on a certain date, or on failure by a party to fulfil obligations agreed upon.


The parties to the standstill agreement should affix their signature thereupon. This adds to the validity of the document.

Standstill agreement in context of restructuring

Standstill agreements can be an effective tool to deal with finance-related disputes, debt enforcement actions, and restructuring and insolvency activity as well. It is an agreement between the company and its creditors which restrains creditor enforcement action. It gives you (the company) the much-needed breathing space while you are exploring options for restructuring. Also, a standstill agreement allows the company to see if it has reasonable prospects to survive post-restructuring.

Typical features of a standstill agreement

  1. Creditors agree not to take action for enforcement of their debt against the debtor company for a specified period, also called the ‘standstill period’.
  2. The amount of debts owed to the creditors remain fixed at a particular date, also called the ‘standstill date’.
  3. Creditors agree to keep their financing at the level of the standstill date.
  4. The debtor company agrees not to engage in any transaction outside the ordinary course of its business. It is also usually agreed that the debtor company shall not make any changes in the ownership, control, or structure of the business without the approval of the creditors.
  5. The company commits to implementing interim cost-cutting measures and not paying dividends to its shareholders.
  6. The company agrees to disclose the information including its cash position, business operations to the creditors. This allows the creditors to have a complete and reliable picture of the finances of the company. 

It is pertinent to note that the standstill agreement merely suspends or temporarily freezes a commercial relationship or the agreed parts of it (merely suspends the doing of something). It does not and cannot mean the release of obligations. 

Form of a standstill agreement

A standstill agreement does not usually suspend the relationship in its entirety. It is flexible in form, meaning that the parties are free to negotiate and draft their own terms. Parties may agree that certain obligations or services shall continue. For example, the debtor company shall make partial payments to the creditor or that the creditor will continue to provide services. It is an important principle that no creditor should receive new security or repayment of his loan without the agreement of other creditors.

Advantages of entering into a standstill agreement

Advantages for the company

A standstill agreement offers advantages both for creditors and the debtor company. Based on the available financial information, if the directors can reasonably conclude that a standstill agreement would allow the business to continue and resolve the cash flow problem or that it would give some time and space to implement a formal restructuring, then the benefit to the company from entering into a standstill agreement is that it will be protected from the immediate threat of creditor action (especially winding up). In this way, the company can even avoid any damage that might have been caused to its reputation due to the insolvency petition of creditors. 

Advantages for the creditor

For creditors, entering into a standstill agreement is beneficial as it usually permits the disclosure of relevant information which would not have been otherwise available to them in the ordinary course of business. The approach in a standstill agreement is consensual and therefore, the creditors have some control over the situation. They can make an informed decision regarding the company’s prospects for restructuring based on the information provided to them. Also, this is comparatively a more convenient course for the creditors compared to invoking collective winding up proceedings, wherein they end up losing control over the process to the court along with incurring costs, time delay, etc. 

Standstill agreement in context of limitation period

A claim must be issued within the limitation period and the limitation period depends on the type of claim. For example, in India, a claim for breach of contract has to be filed within 3 years. On the expiry of the limitation period, the claim becomes time-barred. Now, what can a standstill agreement do in such a scenario?

A standstill agreement operates to ‘stop the clock’ on the running period of limitation and prevents the party from initiating proceedings during the course of that agreement. It is a voluntary contractual arrangement made between the parties to pause the limitation period for an agreed length of time, usually 3 to 6 months.

It must be noted that in the Indian context, the question as to whether the parties can agree to give up or extend or suspend the period of limitation has never been dealt with in detail. However, at the same time it has to be remembered that as per international practice, standstill agreements are routinely enforceable in the commercial world.

Why should you enter into a standstill agreement

  1. The foremost advantage that a standstill agreement secures to the parties is that it eases the pressure of limitation deadlines.
  2. Also, it gives time and space to a party to think clearly and arrange funds or work out a mutual solution without having to forego their right to file a claim in court. You can use the time to work out a satisfactory friendly resolution without having to spend your money by filing suits or in preparing to go down the litigation road.
  3. Another benefit is that the parties get time to carefully consider the merits of their claim or defence. 

Things to consider while entering into a standstill agreement

A standstill agreement is a contract and its terms and conditions must be carefully drafted

While entering into a standstill agreement, parties must be aware that, being a contract, the standstill agreement is governed by the same rules and principles as applied to the contracts. A standstill agreement should be in written form setting out the terms and conditions agreed upon by the parties. Special care must be taken while drafting these agreements. The terms and duration of the agreement have to be mentioned. Also, each of the potential parties should be included in the agreement.

Parties to a standstill agreement

Sometimes, it may be difficult to say with certainty as to who should be the proper parties to a standstill agreement. Sometimes, there might be talks going on about a merger or there might be a chance that a party could become insolvent. So, if in case a party becomes insolvent, would the claim be against liquidators or in the name of liquidators, and have they been included? These all are relevant considerations that need to be carefully evaluated and effort should be made to bring all the prospective parties within the scope of the agreement and their names and details must be correctly mentioned. Any loopholes might lead to invalidity of the agreement and the limitation period will not stop which will ultimately benefit the defendant.

Cause of action

The standstill agreement should set out the cause of action of the potential claim. If the cause of action is not yet clear, then it is pertinent that the agreement covers all the prospective causes of action. The subject of claim or dispute should be clearly defined in broad terms, so as to capture any claim, or all claims directly or indirectly arising out of or in any way connected with the matters referred to (or involving the parties). 


A situation may arise where parties have to extend the standstill agreement. To meet such a requirement, it would be wise to include an effective mechanism for extension of the agreement/standstill period within the agreement itself. A carefully worded clause that sets out the formalities for extension of the standstill period such as giving of notice, etc. should be inserted. 

Ending the standstill

Parties who have entered into a standstill agreement must be aware of the date when the standstill agreement is likely to end and how much time is left in terms of limitation following the expiry. This will help in further extending the standstill or in preparing for litigation.

Whether the agreement suspends or extends the time

Typically, a standstill agreement is entered into by the parties to suspend time. On the expiry of the standstill, a party is left with the same amount of time to issue a claim as they did on the date of the agreement. However, a standstill agreement may be entered into for the purpose of extending the period of limitation. It must be mentioned as to whether the agreement merely suspends time or extends it. In case of a standstill agreement for extending the period of limitation, a claimant must issue proceedings on the expiry of the standstill period. Here, a final date should be mentioned in the agreement by which the party must commence proceedings.

What if there are multiple defendants

In case there are multiple defendants, the claimant should think about entering into similar standstill agreements with all of them.

Application or usage of standstill agreements

  • A lender and a borrower may enter into a standstill agreement to give the borrower some time to restructure its liabilities. A bank may enter into a standstill agreement with a stressed borrower and suspend the contractual repayment schedule for a certain duration and in turn impose some conditions on the borrower.
  • A standstill agreement may be used to pause the production of a product.
  • A standstill agreement might operate to postpone scheduled payments for a customer.
  • A standstill agreement can be made between governments for better governance.
  • A standstill agreement can be entered into between countries to maintain the status quo or sustain the present state of affairs whereby the liability owed by one nation to another is suspended for a specified duration.
  • Sometimes, a company wants to restrict a shareholder from buying enough shares to influence the decision-making at the company. In such a case, the company may enter into a standstill agreement with him whereby he agrees to suspend the buying of further shares or promises not to buy beyond a certain level in return for some benefit.

Sample of a standstill agreement

Note: The draft given below merely provides an outline of the important clauses of a standstill agreement. To find out what a complete standstill agreement looks like, you can refer to this link.


This Standstill Agreement (this “Agreement”) is made and entered into as of (Date,Year) between ABC Pvt. Ltd. (the “Company”), XYZ Company, PQR Management and RM, XYZ Co. and PQR Management are collectively hereinafter referred to as the “Stockholder”). The Company and the Stockholder are referred to herein as the “Parties.”


(Add witnessing clauses here)

WHEREAS, the Stockholder has filed a Schedule 13G, as amended, under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with the Securities and Exchange Commission indicating the Stockholder’s Beneficial Ownership (as defined below) of 4,281,610 shares of common stock of the Company, par value $0.001 per share (the “Common Stock”), and subsequently acquired 106,800, giving it Beneficial Ownership of a total of 4,388,410 shares of Common Stock representing approximately 9.7% of the total outstanding Common Shares (as defined below) as of the date hereof;

WHEREAS, the Stockholder has stated to the Company that the Stockholder is obligated to purchase an additional 3,730,000 shares of Common Stock (the “Additional Shares”) pursuant to put options it entered into if those put options are exercised on January 14, 2009, thereby increasing the Stockholder’s total Beneficial Ownership interest up to seventeen point ninety-five percent (17.95%) of the total outstanding Common Shares;

WHEREAS, the Stockholder has entered into total return equity swap agreements (the “Swaps”) with certain counterparties relating to 3,894,023 shares of Common Stock in the aggregate (the “Reference Shares”), that provide that (i) the Stockholder will be obligated to pay to the broker any capital depreciation of the Reference Shares as of maturity, plus interest, and (ii) the broker will be obligated to pay to the Stockholder any capital appreciation of the Reference Shares as of maturity, and (iii) all balances under the Swaps will be cash-settled at maturity and there will be no transfer of voting or dispositive power over the Reference Shares;

WHEREAS, the Company is a party to that certain rights agreement, dated as of July 30, 2004, by and between the Company and U.S. Stock Transfer Corporation (the “Rights Plan”) that is triggered in the event any one person or group acquires a Beneficial Ownership interest of fifteen percent (15%) or more of the then outstanding Common Shares (subject to certain exceptions as set forth in the Rights Plan);

WHEREAS, the Stockholder has asked the Company to amend the Rights Plan to allow it to purchase the Additional Shares without triggering the Rights Plan; and

WHEREAS, the Company is willing to amend the Rights Plan but only if the Stockholder agrees to enter into this Agreement.

NOW, THEREFORE, in consideration of the mutual agreements and understandings set forth herein, the Parties hereto hereby agree as follows:



(Define terms such as Affiliate, Agreement, Beneficial owner, common shares, company acquisition transaction and other terms relevant to your agreement)



(All the provisions regarding the standstill to be added here in a detailed form)

2.1 Standstill Provisions.

2.2 Termination of Standstill Provisions. 

2.3 Voting. 

2.4 Sales of Shares of Common Stock. 





4.1 Severability

4.2 Specific Enforcement. 

4.3 Further Assurances. 

4.4 Entire Agreement; Amendments. 

4.5 Notices. 

4.6 Waivers. 

4.7 Headings. 

4.8 Successors and Assigns.

4.9 No Third Party Beneficiaries.

4.10 Governing Law; Venue.

4.11 Counterparts.  

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first written above.

(Signature and details of parties)


A standstill agreement may allow one party to lessen concerns held by another party by promising to avoid potential actions they could otherwise take. A standstill agreement drafted in haste might have severe consequences for the parties involved, for example, the agreement will be declared invalid if it covers the wrong claim or terms are not clear, etc. Hence, it is important that the agreement is drafted carefully in accordance with the intention of the parties and effort should be made to cover and clarify all the prospective issues that might lead to any confusion later on. 


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