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Non Compete Clause In Shareholders Agreement

Non Compete Clause In Shareholders Agreement Template for India

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Key Requirements PROMPT example:

Non Compete Clause In Shareholders Agreement

"I need a Non-Compete Clause for a Shareholders Agreement for my technology startup in Bangalore, with specific focus on preventing shareholders from engaging in competing AI development activities across India for the duration of their shareholding and protecting our core intellectual property."

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Document background
A Non-Compete Clause in Shareholders Agreement is essential when companies need to protect their business interests by preventing shareholders from engaging in competitive activities. This document is particularly crucial in the Indian legal context, where non-compete restrictions must be carefully drafted to ensure enforceability under Section 27 of the Indian Contract Act, 1872. The clause typically includes detailed definitions of competitive activities, geographical limitations, duration of restrictions, and specific carve-outs for permitted activities. It's commonly used during corporate restructuring, investment rounds, or when new shareholders join the company. The document must balance the company's need to protect its business interests with Indian legal requirements, which generally favor free trade and invalidate post-termination non-compete restrictions.
Suggested Sections

1. Parties: Identification of the shareholders and the company entering into the agreement

2. Background: Context of the agreement, business nature, and relationship between parties

3. Definitions: Key terms used in the agreement including 'Competitive Business', 'Confidential Information', 'Territory'

4. Scope of Non-Compete: Detailed description of prohibited competitive activities and business areas

5. Duration and Territory: Time period and geographical boundaries of the non-compete restrictions

6. Shareholders' Obligations: Specific commitments and restrictions on shareholders regarding competitive activities

7. Exceptions and Permitted Activities: Activities explicitly allowed despite the non-compete provisions

8. Consideration: Value or benefit provided in exchange for the non-compete obligations

9. Remedies for Breach: Consequences and available remedies in case of violation

10. Severability: Provisions for maintaining validity of other clauses if some are found unenforceable

11. Governing Law and Jurisdiction: Specification of Indian law application and jurisdiction for disputes

Optional Sections

1. Transfer of Shares: Include when non-compete obligations need to be linked to share ownership and transfer restrictions

2. Special Rights of Shareholders: Include when certain shareholders have specific exemptions or additional obligations

3. Post-Exit Obligations: Include for specific obligations after a shareholder exits, noting enforceability limitations under Indian law

4. Industry-Specific Restrictions: Include for specialized industry requirements or regulatory compliance

5. Monitoring and Compliance: Include when specific reporting or monitoring mechanisms are needed

6. Non-Solicitation Provisions: Include when restrictions on hiring employees or engaging with customers are needed

Suggested Schedules

1. Schedule A - Restricted Business Activities: Detailed list of specific business activities prohibited under the non-compete

2. Schedule B - Territory Definition: Detailed geographical boundaries and jurisdictions covered

3. Schedule C - Existing Business Interests: Declaration of current business interests of shareholders that are exempted

4. Schedule D - Consideration Details: Specific details of consideration or benefits provided for non-compete obligations

5. Appendix 1 - Compliance Certificate: Template for periodic confirmation of compliance with non-compete obligations

6. Appendix 2 - Industry-Specific Terms: Technical or industry-specific definitions and requirements

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok³ÉÈË°æ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co
Relevant legal definitions



































Clauses

























Relevant Industries

Technology and Software

Manufacturing

Professional Services

Healthcare and Pharmaceuticals

Financial Services

Retail and E-commerce

Telecommunications

Media and Entertainment

Consulting

Research and Development

Industrial Services

Biotechnology

Relevant Teams

Legal

Corporate Affairs

Compliance

Board of Directors

Executive Leadership

Corporate Governance

Risk Management

Finance

Company Secretarial

Shareholder Relations

Relevant Roles

Chief Executive Officer

Chief Legal Officer

Corporate Lawyer

Legal Counsel

Company Secretary

Chief Financial Officer

Business Development Director

Investment Manager

Compliance Officer

Board Director

Managing Director

Shareholder Relations Manager

Corporate Governance Officer

Risk Management Officer

Industries





Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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