Standstill agreements, also known as “stand-still agreements,” are a popular legal tool in Australia. They are agreements between two parties that prevent one of the parties from taking any legal action against the other party for a specific period. Standstill agreements are used in a range of situations, including mergers and acquisitions, loan agreements, and partnership agreements. They are designed to give both parties breathing space so that they can negotiate a settlement or resolution.

The purpose of a standstill agreement is to maintain the status quo and provide a period of time for the parties to reach a resolution. This can be particularly important in mergers and acquisitions, where a buyer may want to take a closer look at a target company before making a formal offer. During this time, the seller agrees not to solicit other offers, and the buyer agrees not to pursue any legal action against the seller.

In loan agreements, standstill agreements are used to prevent the lender from taking any legal action against the borrower for a specific period. This gives the borrower time to make payments or negotiate a new repayment plan without the threat of legal action.

In partnership agreements, standstill agreements are used to prevent one partner from taking any legal action against another for a specific period. This can be useful in situations where a partnership is breaking down, and the parties need time to negotiate a separation agreement.

Standstill agreements can be challenging to enforce, particularly if one party decides not to honor the agreement. However, they are still a useful tool for negotiating settlements and resolving disputes. In some cases, they can even prevent disputes from arising in the first place.

There are risks associated with standstill agreements, particularly for the party that agrees not to take legal action. If negotiations fail, the party may lose valuable time and may even forfeit the right to pursue legal action. As such, parties should carefully consider the risks and benefits of entering into a standstill agreement before doing so.

In conclusion, standstill agreements are a valuable legal tool in Australia, particularly in M&A, loan agreements, and partnership agreements. They provide breathing space to negotiate a resolution while maintaining the status quo. While there are risks associated with these agreements, they can be an effective way to prevent disputes and resolve conflicts.