This clause stops someone from buying more shares in a company, making a takeover bid, or publicly criticizing the company's management without permission. It's often used to protect a company from hostile takeovers or aggressive investors. The clause can last for years and severely limits what an investor can do with their stake. Courts in both the UK and US have sometimes struck down overly broad standstill clauses as unreasonable restraints on property rights, so they need to be carefully drafted.
This is a high-risk clause—avoid signing it unless you're certain about your long-term commitment to the company. If you must sign, insist on a clear end date (not indefinite), a "fiduciary out" clause that lets you respond to a genuine takeover offer, and a right to sell your shares to a third party after a set period. Get legal advice before signing because this clause can trap your money. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause stops someone from buying more shares in a company, making a takeover bid, or publicly criticizing the company's management without permission.
Why should I care about this clause?
It's often used to protect a company from hostile takeovers or aggressive investors.
What are my options?
The clause can last for years and severely limits what an investor can do with their stake.
How does this affect small businesses?
Courts in both the UK and US have sometimes struck down overly broad standstill clauses as unreasonable restraints on property rights, so they need to be carefully drafted.