Related Expertise
- Account collection
- Addition or departure of shareholders
- Bankruptcy and Restructuring
- Buy-Sell Agreement
- Change in the legal form of a company
- Commercial litigation (shareholders, employees or others)
- Company Book
- Consignment Contract
- Contract of partnership
- Convertible debenture
- Corporate reorganization and restructuring
- Corporate resolutions
- Creation of a subsidiary
- Director’s liability
- Drafting of articles of constitution
- Franchising
- Governance and Internal Management
- Implementation of a Tax Memo
- Intellectual Property
- Joint Venture Agreement
- Legal Publicity of Enterprises
- Management Company
- Planning and Tax Litigation
- Preparation and review of commercial leases
- Securities and access to public markets
- Share subscription agreement
- Shareholders Agreement
- Starting a business
- Strategic Partnership
- Taxation and tax litigation
- Term Sheet
- The Letter of Intent of the Offer to Purchase
- Trusts (estate and asset protection)
- Unfair competition, Duty of loyalty
Multiple contractual mechanisms of a restrictive nature exist in Quebec to protect a business. Among these are the non-disclosure agreement, the non-solicitation clause and the non-competition clause.
Non-competition clauses can be found in various aspects of the legal and financial management of a company. For example, they may be drafted in the context of an employment contract, when hiring employees, executives or managers. Similarly, non-competition clauses may be relevant to regulate the actions of shareholders, which is why it may be appropriate to include such a clause in the shareholders’ agreement.
The presence of a non-competition clause in the shareholders’ agreement makes it possible to prevent the shareholder or the person who has disposed of his or her shares from entering into business relations with certain companies and persons.
The non-competition clause must be defined as to its duration. A precise field of activity must also be provided for in order to easily distinguish the companies with which the signatory of the agreement may not enter into business relations. Finally, it is imperative to specify a territory within which the signatory is prevented from competing.
Thus, the non-competition clause differs from the non-solicitation clause in that the latter covers the company’s clientele, whereas the non-competition clause covers a clientele defined by a territory. As is often the case with the non-solicitation clause, the non-competition clause is generally accompanied by a penalty clause.
The main purpose of the non-competition clause is to prevent the company’s shares from losing value. Indeed, whether it is at the time a person holds shares in the company, or for a certain period of time after having sold them, the other signatories of the agreement ensure a certain stability by preventing competition with other companies, according to determined terms.
Although the requirements for non-competition clauses are more flexible in commercial matters than in employment matters, certain requirements still exist for such a clause to be valid. The three parameters, namely duration, territory and field of activity, must be reasonable and clearly established and must not prevent the signatories from earning a living.
Bernier Fournier’s team will assist you in drafting and analyzing a non-competition clause to ensure that it is not considered unreasonable by a judge. Our firm can also support you in litigation concerning the non-competition clause itself, in order to ensure that you can effectively assert your rights.