Standstill Agreement Creditors
Jersey`s national insolvency system remains relatively undeveloped and has little to do with other legal systems. There is no official administration or rescue jurisdiction, nor are there any legal requests or requests for liquidation. The only insolvency procedure that can be invoked by a creditor is disastrous, a kind of forced liquidation procedure in which the debtor`s assets are transferred to the Viscount (a senior court official who acts as the official beneficiary of the island). However, Jersey is generally considered a creditor-friendly jurisdiction, in part because of the rights granted to creditors guaranteed under the Security Interests (Jersey) Law 2012. 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.
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. From the point of view of the debtor company, the decisive question is whether its medium- and long-term business prospects are strong after the restructuring. A status quo agreement can reassure directors that it is appropriate for the business to continue trading and that there is a reasonable prospect that the business will survive. In banking, a status quo agreement between a lender and a borrower terminates the contractual repayment plan of a struggling borrower and imposes certain steps that the borrower must take. A status quo agreement recognizes the economic challenges posed by the seriousness of the situation caused by the Covid 19 pandemic and formalizes a legal agreement between a debtor company and creditors that could allow the company to survive and creditors to achieve a better return than they could receive in the event of liquidation. It offers a period of defined financial stability, keeps the debtor`s business outside of a formal insolvency procedure and concentrates the minds of the company and creditors, who now act as an organized collective, on restructuring plans. A recent example of two companies that have signed such an agreement is Glencore plc, a Commodities trader based in Switzerland, and Bunge Ltd, an American company.