A Non-Compete Clause in Shareholders Agreement is a critical component of corporate governance documentation under German law, typically implemented when companies need to protect their legitimate business interests from competition by their shareholders. This document becomes particularly relevant during company formations, share transfers, or when updating existing shareholder arrangements. It must carefully balance the protection of company interests with the strict requirements of German competition law, which generally limits non-compete obligations to what is reasonably necessary for business protection. The agreement must specify clear geographical boundaries, time limitations (typically not exceeding 2-3 years under German practice), and precise scope of restricted activities. Special attention is given to compliance with 搂138 BGB (German Civil Code) regarding good morals and public policy, and the GWB (German Act Against Restraints of Competition).
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1. Parties: Identification of all parties to the agreement, including full legal names and addresses
2. Background: Context of the agreement, including description of the company and existing shareholder relationships
3. Definitions: Detailed definitions of key terms used throughout the agreement, particularly defining 'Competition', 'Restricted Business', and 'Territory'
4. Scope of Non-Compete Obligations: Detailed description of prohibited competitive activities and business areas
5. Duration and Geographic Scope: Specific timeframe and territorial limits of the non-compete restrictions
6. Exceptions and Permitted Activities: Activities explicitly allowed despite the non-compete provisions
7. Consideration: Details of any compensation or consideration for the non-compete obligations
8. Enforcement and Remedies: Mechanisms for enforcing the non-compete provisions and remedies for breach
9. Severability: Provisions ensuring remainder of agreement remains valid if specific provisions are found unenforceable
10. Governing Law and Jurisdiction: Confirmation of German law application and jurisdiction for disputes
1. International Provisions: Additional provisions for cross-border application of non-compete restrictions, needed when parties operate internationally
2. Shareholder Categories: Different non-compete obligations for different classes of shareholders, needed when there are varying levels of involvement
3. Post-Exit Obligations: Specific provisions for continued application after a shareholder exits, needed when post-sale restrictions are required
4. Compensation Structure: Detailed compensation arrangements for non-compete obligations, needed when specific remuneration is provided
5. Compliance with Industry Regulations: Industry-specific compliance requirements, needed for regulated sectors
6. Monitoring and Reporting: Procedures for monitoring compliance, needed for complex business structures
1. Schedule 1: Restricted Activities: Detailed list of specific activities, businesses, and operations prohibited under the non-compete clause
2. Schedule 2: Territorial Scope: Detailed maps or descriptions of geographical areas where restrictions apply
3. Schedule 3: Existing Business Interests: List of pre-existing business interests or investments exempt from the non-compete provisions
4. Schedule 4: Compensation Details: Detailed breakdown of any compensation structure related to the non-compete obligations
5. Appendix A: Shareholder Consent Forms: Standard forms for obtaining explicit consent to non-compete provisions
6. Appendix B: Compliance Certificate: Template for periodic certification of compliance with non-compete obligations
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