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"Don't stand on ceremony," means you don't need to act formal and it's okay for you to do so.

Eg: You just recovered your consciousness from a surgery. Your mother tells you that your uncle foot the bills. The next day your uncle comes to visit you and you wanted to get out of your bed and thank him, but then he says, "Don't stand on ceremony." So basically he tells you not to get up and you can just relax. It's okay for you to thank him while lying in your bed.

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