Standstill Clauses: Pausing Rights in Deals and Debt (India)

A standstill clause is a promise to pause. One party agrees not to take a specific action, for a specific period, so the other side gets breathing room. The two places you will meet it are almost opposite in mood: an acquirer promising not to buy more shares or launch a hostile bid while talks continue, and a group of lenders agreeing not to sue, seize collateral, or call a loan while they work out a restructuring plan. The one thing most people get wrong is treating "standstill" as a single legal concept with a fixed meaning. It is not. In India it is almost always a private contractual promise, not something a statute hands you automatically, and its strength depends on what triggers the pause and what makes it end. (Adira, which publishes this guide, makes contract management and CLM software; we wrote this to be useful whether or not you ever use it.)

This guide covers both contexts: the M&A standstill that restrains a bidder, and the lender standstill inside an inter-creditor agreement under the Reserve Bank of India's stressed-assets framework. Both share the same skeleton, restrained party, restrained action, duration, and a fall-away trigger, and both fail the same way when a piece of that skeleton is missing.

Plain meaning

A standstill clause takes an action a party would otherwise be legally free to take, and suspends it for an agreed window. It does not waive the underlying right. An acquirer who agrees to a standstill still owns whatever shares it already holds and can still negotiate; it just cannot buy more, launch a tender offer, or solicit proxies until the standstill lifts. A lender who signs on to a standstill still has its loan, its security interest, and its right to recover; it just agrees not to enforce that right, individually, while a collective resolution plan is worked out.

Two things make a standstill different from a plain "no action" promise. First, it is time-bound or event-bound by design, never open-ended, because an indefinite standstill is functionally a waiver dressed up as a pause. Second, it is reciprocal in substance even when it reads as one-sided on paper: the acquirer gets a calmer table in exchange for restraint, and lenders get a shot at a coordinated recovery instead of a value-destroying scramble to seize collateral first.

Who it protects and what triggers it

In M&A, a standstill protects the target company and its board. It is usually demanded after a buyer, fund, or activist has built a toehold stake, and the target wants time to run a process instead of being forced into a decision by an accumulating stake. It triggers the moment the bidder crosses the agreed line, most often "acquiring further shares" or "announcing without consent," and the target's typical remedy is an injunction plus whatever damages the agreement names.

In debt, a standstill protects the borrower and, just as importantly, each lender from every other lender. Once a borrower defaults or is expected to, the first lender to sue or seize collateral usually gets paid first, pushing every lender toward that same race, even when a coordinated restructuring would recover more for everyone. A standstill removes that incentive by having lenders commit, together, not to act individually. It triggers at default or when lenders classify the account as stressed, and it lives inside the inter-creditor agreement (ICA) RBI's framework requires them to sign.

What to look for

Four things decide whether a standstill actually does its job:

1. The restrained action, defined precisely. "Shall not take adverse action" is not a definition. "Shall not acquire beneficial ownership of any additional voting securities" or "shall not accelerate, demand payment of, or enforce any security interest" is.
2. A fixed end date, not a vague one. "Until the parties otherwise agree" is not an end date; a calendar date, or "execution of definitive agreements or 90 days, whichever is earlier," is.
3. Fall-away triggers. What event ends the standstill early? A material breach, a competing bid, a payment default during the standstill itself, these are the usual triggers, and their absence is the single biggest defect in a badly drafted standstill.
4. Carve-outs. What can the restrained party still do during the standstill? A lender should keep the right to adjust margin money or cash collateral against its own facility; an acquirer should keep the right to respond to an unsolicited superior offer if a fiduciary-out exists elsewhere in the deal papers.

The Indian position: two frameworks, quoted

Debt standstill: the RBI's Prudential Framework and the ICA. RBI's circular "Prudential Framework for Resolution of Stressed Assets" (RBI/2018-19/203, DBR.No.BP.BC.45/21.04.048/2018-19, dated 7 June 2019) does not itself impose a standstill by force of law. What it does is make the inter-creditor agreement mandatory. Paragraph 10 states:

"Any resolution plan (RP) implemented under this framework shall require the lenders to enter into an Inter-Creditor Agreement (ICA)... The ICA shall provide that any decision agreed by lenders representing 75 per cent by value of total outstanding credit facilities (fund based as well non-fund based) and 60 per cent of lenders by number shall be binding upon all the lenders."

The circular also fixes a Review Period: "lenders shall undertake a prima facie review of the borrower account within thirty days from such default." The ICA signed inside that window is where the actual standstill clause lives, typically a promise not to sue, accelerate, or enforce security individually while the plan is finalised. Read the full circular on the RBI website. Note what this is not: the automatic moratorium under Section 14 of the IBC, which an Adjudicating Authority orders once insolvency proceedings begin, prohibiting "the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority" (read Section 14 on Indian Kanoon). An ICA standstill is a contract lenders choose to sign; an IBC moratorium is a court order binding everyone regardless. Confusing the two is a common, costly mistake.

M&A standstill: no dedicated statute, but a live backdrop. India has no standalone "standstill agreement" statute for hostile bids. What shapes the drafting instead is Regulation 3 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011:

"No acquirer, who together with persons acting in concert with him, has acquired and holds... shares or voting rights in a target company entitling them to exercise twenty-five per cent or more of the voting rights in the target company but less than the maximum permissible non-public shareholding, shall acquire within any financial year additional shares or voting rights in such target company entitling them to exercise more than five per cent of the voting rights, unless the acquirer makes a public announcement of an open offer for acquiring shares of such target company in accordance with these regulations."

Read the full regulation on SEBI's site. A standstill in an Indian M&A term sheet usually pins the acquirer below this 25 percent trigger or the 5 percent creeping-acquisition limit, and adds a private promise not to announce or solicit board seats without consent. It does work SEBI's rules do not: nothing in SAST stops a bidder below 25 percent from quietly stakebuilding; the contract closes that gap, if the target has the leverage to demand it.

A named case: what happens when a standstill collides with a statutory right

Amitabh Kumar Jha v. Bank of India & Anr., National Company Law Appellate Tribunal, Company Appeal (AT) (Insolvency) No. 1392 of 2019, order dated 22 May 2020. A corporate debtor's director argued that an inter-creditor agreement, which contemplated collective decision-making, should have stopped one lender holding roughly 7.75 percent of the debt from filing a Section 7 insolvency application alone. The NCLAT rejected this and held that the statutory right under Section 7 of the IBC cannot be curtailed or made subservient to any inter-creditor agreement. The reasoning traces to Section 238: "The provisions of this Code shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law." An ICA standstill, however tightly drafted, cannot override a lender's statutory right to move for insolvency, which is why well-drafted ICAs pair the standstill with a genuine dissenting-lender exit rather than pretend the pause is airtight.

Red flags table

Normal	Red flag	Why it matters
Fixed date or event ("90 days or signing of definitive agreements, whichever is earlier")	No end date, or "until the parties agree otherwise"	An open-ended standstill is a disguised waiver with nothing coming back
Fall-away for a material breach, a competing offer, or a fresh default	No fall-away trigger at all	No way to exit early even if the other side stops holding up its end
Carve-out for margin money or cash collateral the lender already holds	Standstill blocks a lender from adjusting collateral it already holds	One-sided restraint with no matching commitment back is a red flag on its own
ICA consistent with the RBI framework's 75 percent value, 60 percent number thresholds	Clause purports to bind a lender who never signed, or claims to override Section 7 rights	Inconsistent with the RBI framework and Amitabh Kumar Jha; unenforceable against a dissenter
M&A standstill scoped to the live deal window, ending when talks end or a deadline passes	Standstill running a year or more with no deal in sight	No relation to an active process starts to look like a lock-up
Paired with a genuine dissenting-lender exit at not less than liquidation value	Dissenting lender given no exit and no recovery floor	Traps a lender in a plan it never agreed to

Bad clause, better clause

Bad: "The Lenders agree not to take any action against the Borrower or enforce any security in respect of the Facilities. This standstill shall continue until the Lenders mutually agree to terminate it."

What is wrong with it: no end date, no fall-away trigger, no carve-out for collateral the lenders already hold, and no protection for a dissenting lender. Under Amitabh Kumar Jha, it also cannot actually stop a lender from filing under Section 7, so it promises more than it can deliver.

Better: "During the Review Period and for 90 days from the date of this Agreement (the 'Standstill Period'), each Lender agrees not to institute proceedings, accelerate, or enforce any security interest against the Borrower in its individual capacity, except that nothing in this clause restricts a Lender's right to adjust margin money, cash collateral, or a bank guarantee already held against its Facility. The Standstill Period shall end immediately if the Borrower defaults on any payment falling due during it, or if lenders representing 75 percent by value and 60 percent by number resolve to terminate it. A Lender that dissents from the resolution plan finalised at the end of the Standstill Period shall be entitled to exit at not less than liquidation value, in accordance with the Prudential Framework."

What changed: a real end date, a payment-default fall-away, an explicit carve-out for collateral already held, the actual RBI thresholds for a binding decision, and a dissenting-lender exit matching what the framework expects.

To check whether your own standstill clause has a matching end date and fall-away trigger, or is silent on both, drop the agreement into Weave, Adira's free browser-based contract tool, and flag the pairing for review.

How it interacts with related clauses

A standstill clause is rarely the whole story:

• No-shop clauses: a standstill restrains the buyer while a no-shop restrains the seller, mirror-image restrictions at the same stage of a deal. See No-Shop / Exclusivity Clauses in Term Sheets.
• Material adverse change (MAC) clauses: the acquirer's escape hatch if the target deteriorates during the standstill; a long standstill without a MAC leaves the acquirer stuck with a worsening target. See Material Adverse Change Clauses.
• Change of control clauses: the whole point of an M&A standstill is to control when and how control changes; the two are functionally linked in different documents. See Change of Control Clauses.
• Governing law clauses: an ICA standstill's real limits come from Indian statute regardless of what governing law it names, since insolvency remedies are Indian public policy. See Governing Law Clauses Explained.

US and global contrast

In the United States, M&A standstills are a familiar hostile-takeover defence, typically paired with a poison pill under Delaware corporate law; courts there enforce them as legitimate deal-protection devices, subject to fiduciary-duty scrutiny of the target board. US standstills also appear outside a live deal process, a company simply asking a large shareholder not to build a bigger stake, less common as a bare contractual ask in India, where SEBI's open-offer thresholds already do some of that work.

On the debt side, India's ICA approach descends from the same idea as the "London Approach" and INSOL International's Statement of Principles for a Global Approach to Multi-Creditor Workouts, whose first principle calls for creditors to agree a standstill while assessing options collectively rather than racing to enforce. India's version is now backed by an RBI-mandated framework with fixed voting thresholds, where the older London Approach stayed a matter of banking convention, not a formal regulator directive.

FAQ

Is a standstill clause legally binding in India even though it just says "we will not act"? Yes. Drafted as a defined restraint with a term and clear scope, it is an ordinary enforceable contractual promise. What makes it weak is sloppy drafting, no end date, no fall-away trigger, not its legal status.

Can lenders be forced to sign a standstill agreement or ICA? No individual lender can be forced to sign. RBI's framework makes the ICA a precondition for implementing a resolution plan under it, and once lenders representing 75 percent by value and 60 percent by number agree a plan, that binds every signing lender, including dissenters, subject to the exit protection.

Does a standstill stop a lender from going to NCLT? No, and this is the point of Amitabh Kumar Jha v. Bank of India. A lender's statutory right under Section 7 of the IBC to file for insolvency cannot be curtailed by a private inter-creditor agreement, standstill clause included.

What is the difference between a standstill clause and a no-shop clause? A no-shop restrains the seller from courting other buyers during deal talks. A standstill restrains the buyer, acquirer, or lender from taking further action, buying more shares, or enforcing debt. They point in opposite directions at the same stage of a deal.

How long should an M&A standstill last? Long enough to cover the actual negotiation window, usually days or weeks tied to signing definitive agreements, rarely more than a few months without renewal. No relationship to how long talks are expected to take is a sign it was copied from a template, not negotiated.

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This guide explains how standstill clauses generally work in Indian M&A and debt restructuring, and what the RBI framework and the case law say about their limits. It does not tell you whether a specific clause, in your specific deal, will hold up if tested, that depends on facts and exact wording. For that, talk to a lawyer experienced in the relevant area before you sign a standstill with real money riding on it.