Standstill Agreement Restructuring

April 12, 2021

A recent example of two companies that have signed such an agreement is Glencore plc, a Commodities trader based in Switzerland, and Bunge Ltd, an American agricultural commodities trader. In May 2017, Glencore took an informal step to buy Bunge. Shortly thereafter, the parties agreed to a status quo agreement that prevents Glencore from accumulating shares or making a formal offer for Bunge until a later date. The Isle of Man law does not provide for restrictions on status quo agreements. Faced with a credit crunch, debtors and their creditors are free to enter into any agreements they may have in their long-term interests. It is generally accepted that out-of-court training sessions allow viable businesses to continue to work and successfully exit financial difficulties. They also allow creditors in general, but lenders in particular, to reduce losses and avoid the social and economic consequences of large corporate bankruptcies. Important stakeholders, such as customers, employees, suppliers and investors, are assets as companies undergoing out-of-court restructuring procedures continue to trade. 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.

In the end, deadlock is a form of pragmatic compromise between the company and its creditors: nevertheless, there are instruments of restructuring outside of a formal resolution process: in other areas of activity, a status quo agreement can be virtually any agreement between the parties, in which both parties agree to discontinue the case for a certain period of time. This may include an agreement to defer payments to help a company in difficult market conditions, agreements to stop the production of a product, agreements between governments or many other types of agreements. In banking, a status quo agreement between a lender and a borrower terminates the contractual repayment plan of a struggling borrower and imposes certain steps that the borrower must take.