Standstill Agreement
A Standstill Agreement is a contract under which a party temporarily agrees not to exercise specified legal, financing, ownership, enforcement or transaction rights during a defined period and subject to stated exceptions.
How it works
The term covers several transaction settings. An investor can agree not to convert securities, submit purchase notices, acquire additional shares, pursue control actions or enforce specified remedies. A creditor can agree to delay enforcement while negotiations proceed. The agreement defines the Standstill Period, restricted actions, exceptions, termination events and what rights resume afterward. A standstill ordinarily suspends identified actions rather than extinguishing the underlying rights unless the contract says otherwise.
The agreement temporarily restrains defined actions
The operative clause identifies exactly what the party must refrain from doing during the Standstill Period.
Exceptions can preserve limited activity
Price thresholds, ordinary-course rights, regulatory requirements or negotiated carve-outs can permit actions that would otherwise be restricted.
Termination events can end the standstill early
A material breach, default, transaction termination or specified date can restore the restrained rights.
Underlying rights can remain intact
Unless waived or amended separately, the agreement can simply delay exercise rather than cancel the contractual or legal right.
Worked example: temporary conversion restriction
A preferred holder can normally convert at any time but agrees not to convert before December 31 except when the common stock trades above an agreed threshold.
Why standstills create negotiating space
Temporary restraint can reduce immediate execution or enforcement pressure while parties pursue financing, settlement or strategic alternatives.
Common mistakes
Treating standstill as permanent waiver; assuming all standstills restrict share purchases; overlooking exceptions; and ignoring early-termination provisions.
Example
A financing investor agrees for six months not to submit conversion notices on preferred stock except under stated market-price conditions. The underlying security remains outstanding, and ordinary exercise rights resume when the Standstill Period ends unless another event terminates the agreement earlier.
Example
A financing investor agrees for six months not to submit conversion notices on preferred stock except under stated market-price conditions. The underlying security remains outstanding, and ordinary exercise rights resume when the Standstill Period ends unless another event terminates the agreement earlier.
Professional note
Do not infer the restricted conduct from the title. Activist standstills, financing standstills and creditor-enforcement standstills can constrain entirely different rights.
Related terms
- Employee Stock Purchase Plan (ESPP)
An employee stock purchase plan lets eligible employees purchase employer shares, usually through payroll deductions and often at a discount.
- Lock-Up Agreement
A lock-up agreement restricts specified shareholders from selling shares for a stated period after an IPO or other transaction.
- Consent Rights
Consent Rights are contractual approval rights that require a company to obtain a specified investor’s or stockholder group’s consent before taking enumerated corporate actions.
- Voting Agreement
A Voting Agreement is a contract under which one or more stockholders agree how they will vote, consent or otherwise exercise specified voting power on identified matters during the agreement’s term.
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