Non-compete clause
A contractual undertaking by the seller not to compete with the sold business for a defined period.
The non-compete clause protects the business value paid for by the buyer, in particular the customer base and know-how. The seller undertakes not to compete with the sold business after closing within a defined scope, territory and time. Without such a clause the seller could draw the transferred value back out.
For the restriction to be valid and permissible under competition law it must be limited in scope and duration to what is necessary to protect the transaction. Terms of two to three years are customary. Under Austrian law an excessively broad clause can be wholly or partly ineffective. The covenant is often combined with a contractual penalty and a confidentiality obligation.
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This explanation gives a general overview of Austrian law and does not replace advice in an individual case. The specific circumstances of your transaction are always decisive.
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Non-disclosure agreement (NDA)
A contract obliging the parties to keep confidential the information disclosed during the transaction process.
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Closing
The completion of the transaction at which, once all conditions are satisfied, the shares are transferred and the purchase price is paid.
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Share purchase agreement (SPA)
The central agreement governing the acquisition of a business (share or asset deal), covering the object of sale, purchase price, warranties and completion.
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