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 specified 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. During the status quo period, a new agreement is negotiated, which generally changes the original loan repayment plan. This option is used as an alternative to bankruptcy or enforced execution if the borrower cannot repay the loan. The status quo agreement allows the lender to save some value from the loan. In the event of forced execution, the lender must receive nothing. By working with the borrower, the lender can improve its chances of repaying some of the outstanding debt. A status quo agreement is a form of anti-support measure. A company that is pressured by an aggressive bidder or activist investor believes that a status quo agreement is useful in weakening the unsolicited approach. The agreement gives the target entity greater control over the deal process by requiring the bidder or investor to buy or sell the company`s shares or launch proxy contests. 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. As a hostile anti-opaque defense mechanism, the target company can obtain a promise from an unfriendly bidder to limit the amount of shares the bidder can buy or hold in the target company. This gives the target company time to implement other acquisition defence strategies.
In return, the target entity may repurchase the equity holdings of the potential purchaser on the target share with a premium. The target company may offer another incentive, such as. B a seat on the board of directors. A status quo agreement can also be an agreement between the parties not to deal with other parties for a specified period of time during negotiations. It can also be used as an alternative to bankruptcy or enforced execution. Ordinary shareholders tend not to like status quo agreements because they limit the potential returns of a buyout. A status quo agreement between a lender and a borrower may also exist when the lender stops requiring a planned interest or capital payment for a loan to give the borrower time to restructure its debts. A status quo agreement is an agreement that preserves the status quo. It is an agreement between the objective and the bidder that prevents the bidder from making an offer to purchase the target without first obtaining its approval. It can be added as a provision in the confidentiality agreement and will be executed before obtaining due diligence material. A status quo agreement aims to prevent hostile bids and provides a possible remedy in case the bidder uses confidential information to make a hostile offer if the parties fail to reach a mutual agreement on the terms of sale.
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.