Standstill Agreement Finance

A status quo agreement can be a useful tool in many scenarios. For example, a company faces individual pressure from creditors when a legal claim has expired and the debtor company is temporarily insolvent, but the unsecured creditor does not wish to avail itself of a collective liquidation procedure, with all the complexity and associated costs. In this case, the status quo agreement maintains the filing of proceedings long enough to allow the debtor company to raise the necessary funds to repay the debts. In a more complex situation, for example. B, where there are several bondholders (perhaps different marginal tranches) and institutional lenders, the status quo agreement provides a respite to explore formal restructuring. A status quo agreement is a form of anti-support measure. The second way is restructuring. Since Bermuda has no direct equivalent to administrative procedures in England and Wales or as part of a Chapter 11 proceeding in the United States, this gap has been filled by the practice of the Bermuda Supreme Court over the past two decades, its power to appoint liquidators under the Corporations Act has been interpreted in a whimsical manner to include the power to appoint temporary liquidators to restructuring purposes. This is a particularly useful option for a Bermuda business in which directors believe the business is viable and provides a high level of creditor support to restructure the company`s debt, but not all creditors can accept this approach or be persuaded to enter into a status quo contract. At the international level, it may be an agreement between countries to maintain the current situation, in which a responsibility owed to one to the other is suspended for a specified period of time.

The Guernsey Act uses the doctrine of limitation, which is similar to the notion of statutes of limitations seen elsewhere. However, the statute of limitations is intended to bring a complete end to the right to a right as opposed to the restriction that prevents an applicant from accessing a possible remedy. Discussions focus on whether a status quo contract would be seen as a means of granting statutes of limitations, but in general, the parties accept that status quo agreements are enforceable as a private contract. If a company obtains another loan against its existing guarantees, it will convince the first lender to submit to the new loan, or receive a new loan subordinated to the first. In both scenarios, lenders use a subordinate agreement to outline the terms and conditions between them. Some high-level lenders may include a non-status quo clause or a clause protecting their interests. If this is the time, the resulting agreements are called subordination and status quo agreements.