A standstill agreement is a legal contract enacted between a business entity and its shareholders to defend the organization in events such as to prevent the stakeholder from acquiring further shares and prevent a hostile acquisition attempt or to prevent the company from litigation by their shareholders.
In other words companies use standstill agreements to limit the influence of shareholders and thus are detested by shareholders as this has potential to impair their return on investment. A standstill agreement to be effective should contain the clauses pertaining to rights of the company as well as the respective shareholders, the mutually decided terms and conditions, the privileges the company is offering to its shareholders to limit their actions, the timelines involved and the legal options and remedies available to each of party in case of dispute. At times the companies even agree to pay a premium over the share price in lieu of concessions from the respective stakeholders.
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