A standstill agreement is a legal agreement that prevents one party from taking legal action against another party for a specified period of time. In India, standstill agreements are commonly used in commercial transactions, particularly in mergers and acquisitions.
In a merger or acquisition transaction, the acquiring company may want to prevent the target company from making any major changes to its business or financial structure until the deal is completed. A standstill agreement can be used to achieve this by preventing the target company from entering into certain transactions or making major capital expenditures.
A standstill agreement can also be used in situations where there is a dispute between two parties. By entering into a standstill agreement, both parties agree to refrain from taking any legal action against each other for a specified period of time. This can be useful in situations where the parties are trying to negotiate a settlement or reach a compromise.
In India, the legality of standstill agreements has been a topic of debate. The Competition Commission of India (CCI) has expressed concerns that standstill agreements could be anti-competitive in nature and limit the ability of other companies to enter into the market. As a result, the CCI has recommended that standstill agreements be carefully scrutinized and limited in scope.
Despite these concerns, standstill agreements continue to be widely used in India. Many companies view them as a necessary tool for protecting their interests and ensuring that a transaction or dispute can be resolved in a timely manner.
Overall, standstill agreements can be an effective tool for managing risk and protecting interests in commercial transactions and disputes. However, it is important to ensure that any standstill agreement is carefully crafted and complies with all relevant legal requirements.