Non Compete Clause In Share Purchase Agreement

Non Compete Clause In Share Purchase Agreement Template for Canada

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Key Requirements PROMPT example:

"I need a Non-Compete Clause in a Share Purchase Agreement for the sale of my software development company in Ontario, with a 3-year restriction period covering Canada and the United States, where I'll be selling 100% of my shares but continuing as a technical advisor."

Document background

The Non-Compete Clause In Share Purchase Agreement is a critical component of business acquisition transactions in Canada, typically used when a company or individual is purchasing shares of a business and needs to protect their investment from future competition by the seller. This document outlines the specific terms under which the selling shareholder(s) agree not to compete with the business being sold, including geographic scope, duration, and prohibited activities. It must comply with Canadian federal and provincial laws, particularly regarding reasonable restrictions and competition regulations. The document is essential in M&A transactions where the seller's knowledge, relationships, or expertise could pose a competitive threat to the business post-sale. It includes provisions for enforcement, remedies for breach, and often contains specific carve-outs for permitted activities.

Suggested Sections

1. Parties: Identification of the parties: the Purchaser, the Seller(s), and the Target Company

2. Background: Context of the transaction, including the business nature and rationale for the non-compete provisions

3. Definitions: Key terms including 'Business', 'Restricted Territory', 'Restricted Period', 'Competitive Business', etc.

4. Purchase and Sale of Shares: Core transaction terms including purchase price and payment terms

5. Non-Competition Covenant: Detailed restrictions on competitive activities, including scope, duration, and geographical limitations

6. Non-Solicitation Provisions: Restrictions on soliciting employees, customers, and suppliers

7. Consideration for Restrictive Covenants: Specific consideration provided for the non-compete obligations

8. Reasonableness of Restrictions: Acknowledgment of the reasonableness of restrictions and their necessity

9. Remedies: Consequences of breach, including injunctive relief and damages

10. Governing Law and Jurisdiction: Specification of applicable Canadian law and jurisdiction

11. Severability: Provisions for maintaining validity if certain terms are found unenforceable

Optional Sections

1. Exceptions to Non-Compete: Used when certain competitive activities need to be carved out from restrictions

2. Permitted Activities: Include when seller retains rights to conduct specific business activities

3. Assignment Rights: Used when transfer of non-compete obligations needs to be addressed

4. Independent Legal Advice: Added when there's a need to confirm seller received independent legal counsel

5. Shareholder Employment: Include when selling shareholder will remain employed by the company

6. Confidentiality Provisions: Added when separate confidentiality agreement doesn't exist

7. Tax Matters: Include when specific tax treatment of non-compete consideration needs addressing

Suggested Schedules

1. Schedule A - Restricted Territory: Detailed description or map of geographical restrictions

2. Schedule B - Competitive Business Description: Detailed definition and scope of restricted competitive activities

3. Schedule C - Key Customers and Suppliers: List of specific customers and suppliers covered by non-solicitation provisions

4. Schedule D - Consideration Allocation: Breakdown of consideration between share purchase price and non-compete payment

5. Appendix 1 - Compliance Certificate: Form of annual compliance certificate if required

Authors

Alex Denne

Head of Growth (Open Source Law) @ ��Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co

Relevant legal definitions

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Relevant Teams

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Corporate Development

Mergers & Acquisitions

Executive Leadership

Finance

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Relevant Roles

Chief Executive Officer

Chief Legal Officer

Corporate Lawyer

Mergers & Acquisitions Director

Business Development Manager

Chief Financial Officer

Corporate Secretary

Investment Manager

Legal Counsel

Compliance Officer

Risk Manager

Commercial Director

Managing Partner

Business Owner

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General Non Compete Agreement

A Canadian-compliant agreement that restricts competitive activities post-employment or post-business relationship, subject to reasonable limitations and provincial regulations.

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Let's create your Non Compete Clause In Share Purchase Agreement

Authors

Alex Denne

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