Non-compete clause

Non-competition covenants can be imposed on both managing directors and shareholders; they are intended to prevent shareholders and/or managing directors from competing with the company during or after their employment with it. Non-compete covenants serve in particular to protect the expertise, business secrets and customer contacts of companies.

Non-competition clauses can, for example, be included in the articles of association or the management contract. As extensive non-competition clauses interfere with the freedom of the person concerned to pursue their profession, legislators and case law have developed limits that determine the admissibility of (post-contractual) non-competition clauses in order to avoid unreasonable restrictions; if these are not taken into account within the non-competition clause, it may be inadmissible overall. As a rule, shareholders can be exempted from a non-competition clause by a corresponding shareholder resolution.

The restrictions developed by case law relate to the duration, territorial scope and material scope of the non-competition clause. With regard to its duration, a non-competition clause is generally only permissible for a reasonable period of time. With regard to the geographical scope, the non-compete obligation should be limited to the geographical area within which the company actually operates. Finally, the non-competition clause should be limited to the business area of the company.

Post-contractual non-competition clauses must be compensated by appropriate compensation. This requirement exists in particular against the background of the restriction of professional freedom in order to avoid unreasonable discrimination.

When drafting non-compete clauses, the current case law should always be taken into account and an individual arrangement made for the respective company. We would be happy to advise you in this regard.