{"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&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’ agreement"},"content":{"rendered":"\n
Introduction<\/strong><\/h5>\n\n\n\n


In public limited companies (SA\/AG), the shareholder’s only obligation is to pay up the subscribed capital (art. 680 CO).<\/p>\n\n\n\n


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


However, these shareholders may voluntarily agree to a non-competition clause as part of a shareholders’ agreement.<\/p>\n\n\n\n


The purpose of this paper <\/em>is to outline the non-competition clause in a shareholders’ agreement, and to highlight important points.<\/p>\n\n\n\n


The purpose of the non-competition clause<\/strong><\/h5>\n\n\n\n


Generally speaking, a non-competition clause is used to prohibit the parties to a shareholders’ agreement from competing with the public limited company.<\/p>\n\n\n\n


The inclusion of a non-competition clause in a shareholders’ 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


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


Duration, application and limits of the prohibition on competition<\/strong><\/h5>\n\n\n\n


A prohibition of competition applies in full to shareholders during their participation in a shareholders’ 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 material<\/strong>, geographical <\/strong>and temporal <\/strong>terms.<\/p>\n\n\n\n


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’ agreement (TF 4C.5\/2003 ruling of March 11, 2003, recital 2.1.2).<\/p>\n\n\n\n


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’ 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’ agreement than under an employment contract.<\/p>\n\n\n\n


As far as the 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’s purpose would be problematic. As a general rule, it would be better to base the prohibition on the company’s actual purpose, rather than on its statutory purpose, which is generally very broad.<\/p>\n\n\n\n


As far as the 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


Finally, with regard to the 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


In principle, these different limits are assessed together, and can be applied in different ways depending on the circumstances.<\/p>\n\n\n\n


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


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


Conclusion<\/strong><\/h5>\n\n\n\n


In the final analysis, including a non-competition clause in shareholders’ agreements enables the parties to a shareholders’ 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 in material<\/strong>, geographical <\/strong>and 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"],"_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}]}}