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. A status quo agreement can be reached between governments for better governance. The concept of a status quo agreement refers to different forms of agreements that companies can enter into to delay actions that could be taken otherwise. A status quo agreement provides different levels of protection and stability to a target company in the event of hostile adoption and promotes an orderly sales process. It refers to an agreement between the parties not to take further action. The agreement is particularly relevant because the bidder would have access to the confidential financial information of the entity concerned. After receiving the commitment of the potential purchaser, the target entity has more time to set up additional defence facilities for the acquisition. In some situations, the target entity agrees to repurchase shares of the target with a premium in return for the potential purchaser.

A status quo agreement can be practically an agreement between the parties, in which both parties decide to suspend a specific issue for a specified date. This may be an agreement to defer payments to help a customer overcome strict market conditions. It can also be agreements to stop the production of a product. In 2019, video game distributor GameStop signed a status quo agreement with a group of investors who wanted changes in corporate governance, believing that the company had intrinsic value when the share price reflected. 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. 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. A status quo agreement can be used as a form of defence of a hostile takeover when a target company receives a commitment from a hostile bidder to limit the amount of shares it buys or holds in the target company. By committing to the promise of the potential acquirer, the target company saves more time to set up new takeover defenses. In many cases, the target company promises in return to repurchase the equity holdings of the potential purchaser for the purpose of an increase. 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. A status quo agreement is a form of anti-support measure. Status quo agreements are also used to suspend the usual limitation period to make a claim in court. [1] A status quo agreement between a bank and a borrower operates on lines similar to those shown above.

It suspends the contractual repayment plan of a stressed borrower and imposes certain conditions on the borrower. 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.