Non-compete clause

The buyer pays for customer relationships and know-how. If the seller set up a competing business immediately afterwards, that value would be at risk. Almost every purchase agreement therefore contains a non-compete clause, often supplemented by a non-solicitation clause for customers and employees.

For sellers, the scope is decisive. Clauses that are too broad can block your future activities, for example as an adviser or investor. Make sure sector, region and duration are clearly defined, with exceptions for purely financial investments.

Legally, the restriction must be necessary for the transfer of the business value; otherwise it breaches § 1 GWB (German competition law) or is void as contrary to public policy under § 138 BGB. According to the European Commission's notice on ancillary restraints, up to three years are justified where customer loyalty and know-how are transferred, and up to two years where only goodwill is transferred. Longer clauses can be entirely invalid.

Example

Hypothetical example: The seller of an engineering firm in the Rhineland undertakes not to offer building services design in Germany for two years. A shareholding of no more than 5% in listed companies remains expressly permitted.