Sale of Business - Noncompetition Agreement - Asset Purchase Transaction
About this form
This Sale of Business - Noncompetition Agreement is a legal document that restricts the seller from competing with the purchaser after the sale of a business. This agreement is essential in asset purchase transactions as it ensures that the seller will not undermine the value of the business purchased by engaging in similar operational activities for a defined period. Unlike standard non-compete forms, this agreement is specifically tailored for asset transfers in business sales, where confidentiality and non-competition are crucial for protecting the purchaser's investment.
What’s included in this form
- Definitions of key terms, such as "Confidential Information" and "Retained Business".
- Non-competition clauses that specify the limitations on the seller's and purchaser's activities post-sale.
- Agreements on the handling of confidential information, prohibiting disclosure without consent.
- Provisions for injunctive relief if any party violates the agreement.
- Governing law and jurisdiction information relevant to the agreement's enforceability.
When this form is needed
This form should be used during the sale of a business when an asset purchase agreement is in place. It is particularly useful when the seller possesses sensitive information or trade secrets, and the purchaser seeks to protect their newly acquired interests. Typical scenarios include transactions involving manufacturing businesses, where competition could lead to a significant loss in value for the purchaser due to the seller's direct competition in the same market.
Who can use this document
- Owners of businesses looking to sell their assets.
- Purchasers acquiring a business and wanting to secure their market position.
- Businesses in the manufacturing sector, especially those involved in niche markets like injection molding.
- Attorneys representing clients in business transactions needing a formal non-competition agreement.
Instructions for completing this form
- Identify and enter the names of the Purchaser and Seller, including their corporate structures.
- Specify the effective date of the agreement and the closing date of the asset purchase agreement.
- Define the terms related to confidential information and scope of competition applicable to both parties.
- Include specific geographical limitations where the non-competition applies.
- Sign and date the agreement in the presence of witnesses or as required by local laws.
Notarization guidance
This form does not typically require notarization unless specified by local law. It is advisable to verify specific requirements in your jurisdiction to ensure its legal effectiveness.
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Make edits, fill in missing information, and update formatting in US Legal Forms—just like you would in MS Word.
Download a copy, print it, send it by email, or mail it via USPS—whatever works best for your next step.
Sign and collect signatures with our SignNow integration. Send to multiple recipients, set reminders, and more. Go Premium to unlock E-Sign.
If this form requires notarization, complete it online through a secure video call—no need to meet a notary in person or wait for an appointment.
We protect your documents and personal data by following strict security and privacy standards.
Typical mistakes to avoid
- Failing to clearly define the scope of the non-competition clause, leading to potential enforceability issues.
- Not specifying the duration of the non-competition period.
- Omitting details about permissible activities after the agreement ends.
- Neglecting to address the handling of confidential information properly.
Why use this form online
- Immediate access to a professionally drafted agreement tailored for your asset purchase transaction.
- Ease of customization to fit specific business needs without the need for lengthy consultations.
- Secure storage and easy retrieval of your legal documents.
Legal use & context
- This noncompetition agreement is enforceable in most jurisdictions as long as its terms are reasonable in scope and duration.
- Courts may modify excessively broad non-competition agreements to make them enforceable.
- Parties should be aware of local laws that may impact the enforceability of noncompetition clauses.
What to keep in mind
- The Sale of Business - Noncompetition Agreement protects the business value and confidential information.
- Both buyer and seller are bound by non-competition and nondisclosure clauses.
- Accuracy in completion and clarity of terms are essential for enforceability.
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FAQ
In most cases, the court will rule in favor of the agreement if the employer can meet certain conditions. This is true regardless of the reason the employee left the company. However, not all non-compete agreements are fully enforceable under the law.
If a business has a major change in ownership, (the sale of a business, for example), part of the terms of the sale may be the assignment of the contract to the new owner.As part of the buy/sell process, a new contract may be substituted for a previous contract, with the agreement of both parties.
These will include the purchase price, of course, and bills of sale, assignment and assumption agreements, intellectual property assignments, real property transfer documents and so on, as well as any legal opinions, employment agreements, escrow agreement and other ancillary documents.
The U.S. Court of Appeals for the Eighth Circuit issued a decision in July 2016 stating that a non-compete agreement could be enforced by a company that bought all the assets of the employer.
Non-Compete Unaffected if Company Maintains ExistenceIf the acquisition is a stock purchase and the acquired company (we'll call it Company B) maintains a separate existence, the non-compete is unaffected. Company B will still be around to enforce the Agreement.
Voiding a non-compete contract is possible in certain circumstances. For instance, if you can prove that you never signed the contract, or if you can demonstrate that the contract is against the public interest, you may be able to void the agreement.
Provisions of an APA may include payment of purchase price, monthly installments, liens and encumbrances on the assets, condition precedent for the closing, etc. An APA differs from a stock purchase agreement (SPA) where company shares, title to assets, and title to liabilities are also sold.
Once the basic terms of the asset sale are agreed, the buyer's solicitor will normally draft the contact of sale. These legal agreements are usually complex and will need to be reviewed by the seller and their solicitor and any amendments agreed between both parties.
An asset purchase agreement or APA is a legally binding document that outlines the terms and conditions of the purchase and sale of some or all of a company's assets.
