The Non-Compete Shareholders Agreement is a crucial document for Canadian businesses seeking to protect their competitive interests and maintain shareholder alignment. It is particularly relevant when shareholders have access to sensitive information or could potentially compete with the company. The agreement must comply with Canadian federal and provincial legislation, including the Competition Act and provincial securities laws. It typically includes detailed provisions on non-compete obligations, confidentiality requirements, share transfer restrictions, and enforcement mechanisms. This document is especially important during company formations, shareholder exits, or when bringing in new shareholders who may have competing interests. The agreement must balance the legitimate business interests of the company with reasonable restrictions that would be enforceable under Canadian law.
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1. Parties: Identification of all shareholders and the corporation entering into the agreement
2. Background: Context of the agreement, including company information and purpose of the restrictions
3. Definitions: Key terms used throughout the agreement, including 'Confidential Information', 'Competitive Business', 'Territory', etc.
4. Non-Compete Obligations: Core restrictions on competitive activities, including scope, duration, and geographic limitations
5. Non-Solicitation Provisions: Restrictions on soliciting employees, customers, suppliers, and other business relationships
6. Confidentiality Obligations: Protection of confidential information and trade secrets
7. Share Ownership and Transfer Restrictions: Rules governing ownership, transfer, and disposition of shares
8. Duration and Territory: Specific timeframes and geographical scope of restrictions
9. Enforcement and Remedies: Rights and remedies in case of breach, including injunctive relief
10. General Provisions: Standard clauses including governing law, severability, amendment procedures, and notices
1. Tag-Along Rights: Optional provision giving minority shareholders the right to join in sale of shares by majority shareholders
2. Drag-Along Rights: Optional provision allowing majority shareholders to force minority shareholders to join in sale of company
3. Put and Call Options: Optional mechanisms for forced share purchases in specific circumstances
4. Management Provisions: Optional section detailing management participation rights when shareholders are also managers
5. Dispute Resolution: Optional detailed alternative dispute resolution procedures
6. Non-Competition Exception Scenarios: Optional carve-outs for specific permitted activities or investments
7. Garden Leave: Optional provisions for paid leave during non-compete period if shareholders are also employees
1. Schedule A - Shareholder Information: Details of all shareholders, including share classes and numbers held
2. Schedule B - Restricted Territory: Detailed description or map of geographical areas covered by non-compete
3. Schedule C - Competitive Business Definition: Detailed description of restricted business activities
4. Schedule D - Confidential Information: Specific categories and examples of confidential information
5. Schedule E - Permitted Activities: List of specifically permitted activities or investments
6. Schedule F - Share Valuation Methodology: Agreed method for valuing shares for transfer purposes
7. Appendix 1 - Deed of Adherence: Form for new shareholders to sign agreeing to be bound by the agreement
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