{"id":10025,"date":"2025-01-27T15:01:32","date_gmt":"2025-01-27T14:01:32","guid":{"rendered":"https:\/\/www.wg-avocats.ch\/?post_type=actualites&#038;p=10025"},"modified":"2025-02-19T11:00:12","modified_gmt":"2025-02-19T10:00:12","slug":"the-non-competition-clause-in-a-shareholders-agreement","status":"publish","type":"actualites","link":"http:\/\/www.wg-avocats.ch\/en\/actualites\/law-of-the-public-limited-company\/the-non-competition-clause-in-a-shareholders-agreement\/","title":{"rendered":"The non-competition clause in a shareholders&#8217; agreement"},"content":{"rendered":"\n<h5 class=\"wp-block-heading\"><strong>Introduction<\/strong><\/h5>\n\n\n\n<p class=\"wp-block-paragraph\"><br>In public limited companies (SA\/AG), the shareholder&#8217;s only obligation is to pay up the subscribed capital (art. 680 CO).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><br>Unlike the law governing limited liability companies (S\u00e0rl\/GmbH), the law governing public limited companies does not provide for the possibility of subjecting shareholders to a prohibition on competing with the company. The law only lays down a prohibition on competition for members of the board of directors or management (cf. art. 717 CO) and for employees of the stock corporation (cf. art. 321a para. 3 or art. 340 CO). Shareholders who do not serve as directors and who are not employees of the company, are therefore not subject to any prohibition of competition.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><br>However, these shareholders may voluntarily agree to a non-competition clause as part of a shareholders&#8217; agreement.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><br>The purpose of this <em>paper <\/em>is to outline the non-competition clause in a shareholders&#8217; agreement, and to highlight important points.<\/p>\n\n\n\n<h5 class=\"wp-block-heading\"><br><strong>The purpose of the non-competition clause<\/strong><\/h5>\n\n\n\n<p class=\"wp-block-paragraph\"><br>Generally speaking, a non-competition clause is used to prohibit the parties to a shareholders&#8217; agreement from competing with the public limited company.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><br>The inclusion of a non-competition clause in a shareholders&#8217; agreement can be particularly useful when there is a profit-sharing plan for employees in place, as well as in certain situations involving business transfers.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><br>In addition, legal prohibitions on competition (art. 717 CO or art. 340 ff CO) can be made more specific or even reinforced.<\/p>\n\n\n\n<h5 class=\"wp-block-heading\"><br><strong>Duration, application and limits of the prohibition on competition<\/strong><\/h5>\n\n\n\n<p class=\"wp-block-paragraph\"><br>A prohibition of competition applies in full to shareholders during their participation in a shareholders&#8217; agreement, and may, if contractually agreed, continue to apply even after a shareholder has left the company. This has the effect of restricting the economic freedom of the shareholder subject to the non-competition clause. Art. 27 para. 2 of the Swiss Civil Code does, however, impose restrictions, in that the clause must be limited in <strong>material<\/strong>, <strong>geographical <\/strong>and <strong>temporal <\/strong>terms.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><br>It should be noted that the limits imposed by law and jurisprudence on non-competition clauses in employment contracts and the conditions set out in articles 340 ff CO are not applicable to determining the validity of a prohibition on competition in a shareholders&#8217; agreement (TF 4C.5\/2003 ruling of March 11, 2003, recital 2.1.2).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><br>One of the reasons for this is that in an employment contract, only the employee (and not the employer) is subject to the prohibition on competition, whereas in a shareholders&#8217; agreement, all shareholders are subject to it equally. Consequently, the application of the non-competition clause can potentially be more far-reaching under a shareholders&#8217; agreement than under an employment contract.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><br>As far as the <strong>material <\/strong>limit is concerned, it is important to specify the branch of activity to which the prohibition of competition relates. A prohibition on competition that also covers activities or holdings outside the scope of the company&#8217;s purpose would be problematic. As a general rule, it would be better to base the prohibition on the company&#8217;s actual purpose, rather than on its statutory purpose, which is generally very broad.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><br>As far as the <strong>geographical <\/strong>limit is concerned, it is necessary that the geographical scope of the prohibition of competition be defined as precisely as possible and that it be limited in space (e.g. within a radius of 50 km around the company or within the territory of the canton of Aargau, TF 4C.5\/2003 of March 11, 2003, recital 2.1.2).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><br>Finally, with regard to the <strong>time <\/strong>limit, a prohibition of competition must also be limited in time (e.g. to two years after the sale of the shares).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><br>In principle, these different limits are assessed together, and can be applied in different ways depending on the circumstances.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><br>For example, a materially broad or geographically extensive prohibition of competition may be admissible if it is only valid for a short period. Conversely, a long-term prohibition of competition may be valid if it is limited to a narrow material area. Non-competition clauses which prevent the entire economic activity of a contracting party for a long period of time are considered excessive. In such cases, the judge may reduce the scope of the non-competition clause by analogous application of art. 163 para. 3 CO.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><br>Lastly, the non-competition clause may be accompanied by a contractual penalty in the event of a breach of the non-competition clause.<\/p>\n\n\n\n<h5 class=\"wp-block-heading\"><br><strong>Conclusion<\/strong><\/h5>\n\n\n\n<p class=\"wp-block-paragraph\"><br>In the final analysis, including a non-competition clause in shareholders&#8217; agreements enables the parties to a shareholders&#8217; agreement to refrain from competing with the corporation, and may prove useful in certain situations. To be valid, however, the non-competition clause must be limited <strong>in material<\/strong>, <strong>geographical <\/strong>and <strong>temporal <\/strong>terms. The authors advise customers to consult a lawyer when drafting such a clause.<\/p>\n","protected":false},"author":10,"featured_media":9996,"parent":0,"template":"","format":"standard","auteur":[258],"slider":[],"droit":[79],"class_list":["post-10025","actualites","type-actualites","status-publish","format-standard","has-post-thumbnail","hentry","auteur-wilhelm-avocats-en","droit-company-law"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.9 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>The non-competition clause in a shareholders&#039; agreement - Wilhelm Avocats<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"http:\/\/www.wg-avocats.ch\/en\/actualites\/law-of-the-public-limited-company\/the-non-competition-clause-in-a-shareholders-agreement\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The non-competition clause in a shareholders&#039; agreement - Wilhelm Avocats\" \/>\n<meta property=\"og:description\" content=\"Introduction In public limited companies (SA\/AG), the shareholder&#8217;s only obligation is to pay up the subscribed capital (art. 680 CO). Unlike the law governing limited liability companies (S\u00e0rl\/GmbH), the law governing public limited companies does not provide for the possibility of subjecting shareholders to a prohibition on competing with the company. The law only lays [&hellip;]\" \/>\n<meta property=\"og:url\" content=\"http:\/\/www.wg-avocats.ch\/en\/actualites\/law-of-the-public-limited-company\/the-non-competition-clause-in-a-shareholders-agreement\/\" \/>\n<meta property=\"og:site_name\" content=\"Wilhelm Avocats\" \/>\n<meta property=\"article:modified_time\" content=\"2025-02-19T10:00:12+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.wg-avocats.ch\/wp-content\/uploads\/2025\/01\/Visuel-LinkedIn-2.png\" \/>\n\t<meta property=\"og:image:width\" content=\"1200\" \/>\n\t<meta property=\"og:image:height\" content=\"1200\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data1\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"http:\\\/\\\/www.wg-avocats.ch\\\/en\\\/actualites\\\/law-of-the-public-limited-company\\\/the-non-competition-clause-in-a-shareholders-agreement\\\/\",\"url\":\"http:\\\/\\\/www.wg-avocats.ch\\\/en\\\/actualites\\\/law-of-the-public-limited-company\\\/the-non-competition-clause-in-a-shareholders-agreement\\\/\",\"name\":\"The non-competition clause in a shareholders' agreement - Wilhelm Avocats\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.wg-avocats.ch\\\/en\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"http:\\\/\\\/www.wg-avocats.ch\\\/en\\\/actualites\\\/law-of-the-public-limited-company\\\/the-non-competition-clause-in-a-shareholders-agreement\\\/#primaryimage\"},\"image\":{\"@id\":\"http:\\\/\\\/www.wg-avocats.ch\\\/en\\\/actualites\\\/law-of-the-public-limited-company\\\/the-non-competition-clause-in-a-shareholders-agreement\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.wg-avocats.ch\\\/wp-content\\\/uploads\\\/2025\\\/01\\\/Visuel-LinkedIn-2.png\",\"datePublished\":\"2025-01-27T14:01:32+00:00\",\"dateModified\":\"2025-02-19T10:00:12+00:00\",\"breadcrumb\":{\"@id\":\"http:\\\/\\\/www.wg-avocats.ch\\\/en\\\/actualites\\\/law-of-the-public-limited-company\\\/the-non-competition-clause-in-a-shareholders-agreement\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"http:\\\/\\\/www.wg-avocats.ch\\\/en\\\/actualites\\\/law-of-the-public-limited-company\\\/the-non-competition-clause-in-a-shareholders-agreement\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"http:\\\/\\\/www.wg-avocats.ch\\\/en\\\/actualites\\\/law-of-the-public-limited-company\\\/the-non-competition-clause-in-a-shareholders-agreement\\\/#primaryimage\",\"url\":\"https:\\\/\\\/www.wg-avocats.ch\\\/wp-content\\\/uploads\\\/2025\\\/01\\\/Visuel-LinkedIn-2.png\",\"contentUrl\":\"https:\\\/\\\/www.wg-avocats.ch\\\/wp-content\\\/uploads\\\/2025\\\/01\\\/Visuel-LinkedIn-2.png\",\"width\":1200,\"height\":1200},{\"@type\":\"BreadcrumbList\",\"@id\":\"http:\\\/\\\/www.wg-avocats.ch\\\/en\\\/actualites\\\/law-of-the-public-limited-company\\\/the-non-competition-clause-in-a-shareholders-agreement\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Accueil\",\"item\":\"https:\\\/\\\/www.wg-avocats.ch\\\/en\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Actualit\u00e9s\",\"item\":\"https:\\\/\\\/www.wg-avocats.ch\\\/actualites\\\/\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"The non-competition clause in a shareholders&rsquo; agreement\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/www.wg-avocats.ch\\\/en\\\/#website\",\"url\":\"https:\\\/\\\/www.wg-avocats.ch\\\/en\\\/\",\"name\":\"Wilhelm Avocats\",\"description\":\"\",\"publisher\":{\"@id\":\"https:\\\/\\\/www.wg-avocats.ch\\\/en\\\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/www.wg-avocats.ch\\\/en\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\\\/\\\/www.wg-avocats.ch\\\/en\\\/#organization\",\"name\":\"Wilhelm Avocats\",\"url\":\"https:\\\/\\\/www.wg-avocats.ch\\\/en\\\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/www.wg-avocats.ch\\\/en\\\/#\\\/schema\\\/logo\\\/image\\\/\",\"url\":\"https:\\\/\\\/www.wg-avocats.ch\\\/wp-content\\\/uploads\\\/2023\\\/09\\\/wilhelm-logo.png\",\"contentUrl\":\"https:\\\/\\\/www.wg-avocats.ch\\\/wp-content\\\/uploads\\\/2023\\\/09\\\/wilhelm-logo.png\",\"width\":809,\"height\":144,\"caption\":\"Wilhelm Avocats\"},\"image\":{\"@id\":\"https:\\\/\\\/www.wg-avocats.ch\\\/en\\\/#\\\/schema\\\/logo\\\/image\\\/\"},\"sameAs\":[\"https:\\\/\\\/www.linkedin.com\\\/company\\\/9387689\"]}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"The non-competition clause in a shareholders' agreement - Wilhelm Avocats","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"http:\/\/www.wg-avocats.ch\/en\/actualites\/law-of-the-public-limited-company\/the-non-competition-clause-in-a-shareholders-agreement\/","og_locale":"en_US","og_type":"article","og_title":"The non-competition clause in a shareholders' agreement - Wilhelm Avocats","og_description":"Introduction In public limited companies (SA\/AG), the shareholder&#8217;s only obligation is to pay up the subscribed capital (art. 680 CO). Unlike the law governing limited liability companies (S\u00e0rl\/GmbH), the law governing public limited companies does not provide for the possibility of subjecting shareholders to a prohibition on competing with the company. The law only lays [&hellip;]","og_url":"http:\/\/www.wg-avocats.ch\/en\/actualites\/law-of-the-public-limited-company\/the-non-competition-clause-in-a-shareholders-agreement\/","og_site_name":"Wilhelm Avocats","article_modified_time":"2025-02-19T10:00:12+00:00","og_image":[{"width":1200,"height":1200,"url":"https:\/\/www.wg-avocats.ch\/wp-content\/uploads\/2025\/01\/Visuel-LinkedIn-2.png","type":"image\/png"}],"twitter_card":"summary_large_image","twitter_misc":{"Est. reading time":"4 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"http:\/\/www.wg-avocats.ch\/en\/actualites\/law-of-the-public-limited-company\/the-non-competition-clause-in-a-shareholders-agreement\/","url":"http:\/\/www.wg-avocats.ch\/en\/actualites\/law-of-the-public-limited-company\/the-non-competition-clause-in-a-shareholders-agreement\/","name":"The non-competition clause in a shareholders' agreement - Wilhelm Avocats","isPartOf":{"@id":"https:\/\/www.wg-avocats.ch\/en\/#website"},"primaryImageOfPage":{"@id":"http:\/\/www.wg-avocats.ch\/en\/actualites\/law-of-the-public-limited-company\/the-non-competition-clause-in-a-shareholders-agreement\/#primaryimage"},"image":{"@id":"http:\/\/www.wg-avocats.ch\/en\/actualites\/law-of-the-public-limited-company\/the-non-competition-clause-in-a-shareholders-agreement\/#primaryimage"},"thumbnailUrl":"https:\/\/www.wg-avocats.ch\/wp-content\/uploads\/2025\/01\/Visuel-LinkedIn-2.png","datePublished":"2025-01-27T14:01:32+00:00","dateModified":"2025-02-19T10:00:12+00:00","breadcrumb":{"@id":"http:\/\/www.wg-avocats.ch\/en\/actualites\/law-of-the-public-limited-company\/the-non-competition-clause-in-a-shareholders-agreement\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["http:\/\/www.wg-avocats.ch\/en\/actualites\/law-of-the-public-limited-company\/the-non-competition-clause-in-a-shareholders-agreement\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"http:\/\/www.wg-avocats.ch\/en\/actualites\/law-of-the-public-limited-company\/the-non-competition-clause-in-a-shareholders-agreement\/#primaryimage","url":"https:\/\/www.wg-avocats.ch\/wp-content\/uploads\/2025\/01\/Visuel-LinkedIn-2.png","contentUrl":"https:\/\/www.wg-avocats.ch\/wp-content\/uploads\/2025\/01\/Visuel-LinkedIn-2.png","width":1200,"height":1200},{"@type":"BreadcrumbList","@id":"http:\/\/www.wg-avocats.ch\/en\/actualites\/law-of-the-public-limited-company\/the-non-competition-clause-in-a-shareholders-agreement\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Accueil","item":"https:\/\/www.wg-avocats.ch\/en\/"},{"@type":"ListItem","position":2,"name":"Actualit\u00e9s","item":"https:\/\/www.wg-avocats.ch\/actualites\/"},{"@type":"ListItem","position":3,"name":"The non-competition clause in a shareholders&rsquo; agreement"}]},{"@type":"WebSite","@id":"https:\/\/www.wg-avocats.ch\/en\/#website","url":"https:\/\/www.wg-avocats.ch\/en\/","name":"Wilhelm Avocats","description":"","publisher":{"@id":"https:\/\/www.wg-avocats.ch\/en\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.wg-avocats.ch\/en\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/www.wg-avocats.ch\/en\/#organization","name":"Wilhelm Avocats","url":"https:\/\/www.wg-avocats.ch\/en\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.wg-avocats.ch\/en\/#\/schema\/logo\/image\/","url":"https:\/\/www.wg-avocats.ch\/wp-content\/uploads\/2023\/09\/wilhelm-logo.png","contentUrl":"https:\/\/www.wg-avocats.ch\/wp-content\/uploads\/2023\/09\/wilhelm-logo.png","width":809,"height":144,"caption":"Wilhelm Avocats"},"image":{"@id":"https:\/\/www.wg-avocats.ch\/en\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.linkedin.com\/company\/9387689"]}]}},"_links":{"self":[{"href":"https:\/\/www.wg-avocats.ch\/en\/wp-json\/wp\/v2\/actualites\/10025","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.wg-avocats.ch\/en\/wp-json\/wp\/v2\/actualites"}],"about":[{"href":"https:\/\/www.wg-avocats.ch\/en\/wp-json\/wp\/v2\/types\/actualites"}],"author":[{"embeddable":true,"href":"https:\/\/www.wg-avocats.ch\/en\/wp-json\/wp\/v2\/users\/10"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.wg-avocats.ch\/en\/wp-json\/wp\/v2\/media\/9996"}],"wp:attachment":[{"href":"https:\/\/www.wg-avocats.ch\/en\/wp-json\/wp\/v2\/media?parent=10025"}],"wp:term":[{"taxonomy":"auteur","embeddable":true,"href":"https:\/\/www.wg-avocats.ch\/en\/wp-json\/wp\/v2\/auteur?post=10025"},{"taxonomy":"slider","embeddable":true,"href":"https:\/\/www.wg-avocats.ch\/en\/wp-json\/wp\/v2\/slider?post=10025"},{"taxonomy":"droit","embeddable":true,"href":"https:\/\/www.wg-avocats.ch\/en\/wp-json\/wp\/v2\/droit?post=10025"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}