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.
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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
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
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
Relevant legal definitions
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Relevant Industries
Technology
Manufacturing
Professional Services
Healthcare
Retail
Financial Services
Construction
Energy
Telecommunications
Consulting
Distribution
Real Estate
Relevant Teams
Legal
Corporate Development
Mergers & Acquisitions
Executive Leadership
Finance
Compliance
Risk Management
Business Development
Strategy
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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