As a professional, I am pleased to provide you with an article on “share purchase agreement restrictive covenants.”
When two parties enter into a share purchase agreement, they agree to certain terms and conditions which govern the sale of shares in a company. One type of provision typically included in such an agreement is a set of restrictive covenants.
A restrictive covenant is a clause in a contract which places limitations on what the parties can and cannot do. In the context of a share purchase agreement, the restrictive covenant is often used to protect the buyer`s investment in the company. The covenants may also be used to prevent the seller from competing with the company, or from taking certain actions that could be detrimental to the business.
There are different types of restrictive covenants that can be included in a share purchase agreement. Some of the most common covenants include:
1. Non-Compete Clause: This clause prohibits the seller from engaging in any business activities that compete with the company after the sale. This covenant may be limited in scope or time and usually defines the geography in which the seller may not operate a similar business.
2. Non-Solicitation Clause: This clause prohibits the seller from soliciting employees, customers or suppliers of the company after the sale. This covenant may be limited in time and usually defines the geography in which the seller may not compete.
3. Confidentiality Clause: This clause prohibits the seller from disclosing any confidential information about the company or its employees, customers, suppliers, or business strategies. This covenant may be limited in time, such as for the duration of the agreement or for a set number of years.
4. Non-Disparagement Clause: This clause prohibits the seller from making any negative statements about the company or its business practices. This covenant may be limited in scope and time and usually vanishes after a certain period.
The inclusion of restrictive covenants in a share purchase agreement is necessary to protect the buyer`s investment in the company. While these covenants place certain limitations on the seller, they serve to create a more stable and predictable future for the company. It is essential that the restrictive covenants in a share purchase agreement are carefully drafted and tailored to the particular circumstances of the transaction.
Overall, when drafting share purchase agreements, you should work with a seasoned attorney to ensure that all essential covenants are included and to ensure that they are well-defined, realistic, and in compliance with the applicable laws and regulations. With such a careful and thorough approach, both seller and buyer are likely to have a successful transaction.