The Isle of Man law does not provide for restrictions on status quo agreements. Faced with a credit crunch, debtors and their creditors are free to enter into any agreements they may have in their long-term interests. Given all the challenges that businesses face as a result of the Covid 19 pandemic and its impact on the global economy, the parties could take a consensual approach to creditor-debtor relations for the unique circumstances they face. In Guernsey, it is possible for a debtor and a creditor to reach a broad agreement on an agreement between them in the form of a status quo agreement on terms that any party can accept. The benefits, both for the creditors and for the debtor company, have already been well taken into account. The commonalities of a status quo agreement are typical: from the point of view of the debtor company, the main consideration is whether its medium- and long-term business prospects are sound 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 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. Contracting parties may enter into leniency agreements providing for a moratorium on payments to creditors. The first step in many restructurings is for borrowers and creditors to agree on a status quo agreement. A stalemate (sometimes called a moratorium) is intended to stabilize the debtor and provide air for the parties to discuss their options in an orderly manner.

It is the contractual equivalent of a statutory rescue scheme, in which a debtor is protected by law from creditors` claims for the purpose of carrying out an organised pardon – of course, a status quo agreement binds only the parties. 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. The position needs to be reviewed with regard to lenders/assistance facilities and hedging credits – agreements between creditors generally contain additional rules regarding coordination and priorities and the common use of guarantees.