Restrictive Covenants Shareholders Agreement

Restrictive Covenants Shareholders Agreement Template for United States

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Key Requirements PROMPT example:

"I need a Restrictive Covenants Shareholders Agreement for my tech startup that specifically prevents our minority shareholders from starting competing businesses within California and Nevada for 2 years, with strong protection for our AI-related intellectual property."

Document background

The Restrictive Covenants Shareholders Agreement is essential when companies need to protect their business interests from competition by their shareholders. This document is particularly important in the United States, where enforcement varies by state and must comply with both federal and state antitrust laws. It typically includes detailed provisions on non-competition, non-solicitation of employees and customers, and confidentiality obligations. The agreement is commonly used during corporate restructuring, investment rounds, or when bringing in new shareholders who may have access to sensitive information or significant market influence.

Suggested Sections

1. Parties: Identification of all shareholders and the company

2. Background: Context of the agreement and purpose of the restrictive covenants

3. Definitions: Key terms used throughout the agreement including Confidential Information, Restricted Business, Territory

4. Non-Competition Covenants: Core restrictions on competitive activities, including scope, duration, and geographic limitations

5. Non-Solicitation Covenants: Restrictions on soliciting customers, employees, and suppliers

6. Confidentiality Obligations: Provisions protecting confidential information and trade secrets

7. Duration and Territory: Specific timeframes and geographical areas where restrictions apply

8. Enforcement and Remedies: Methods of enforcement and available remedies for breach

Optional Sections

1. Garden Leave: Provisions for paid leave during restricted period - used when dealing with senior executives or key employees

2. Transfer Restrictions: Limitations on share transfers to competitors - used when specific share ownership concerns exist

3. Consideration: Specific compensation for restrictive covenants - used when additional consideration is being provided

4. Carve-outs: Specific exceptions to restrictions - used when certain activities need to be permitted

Suggested Schedules

1. Schedule of Shareholders: List of all shareholders and their shareholdings

2. Restricted Territory Map: Geographic illustration of restricted areas

3. Competitor List: Defined list of specific competitors if applicable

4. Confidential Information Schedule: Detailed list of protected information and trade secrets

5. Consideration Schedule: Details of any consideration provided for the restrictions

Authors

Alex Denne

Head of Growth (Open Source Law) @ ��Ƶ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co

Relevant legal definitions

Agreement

Business

Competitor
Confidential Information
Effective Date
Group
Intellectual Property Rights

Permitted Transfer

Restricted Period

Shares
Shareholder
Territory

Transferee

Clauses

Relevant Industries

Technology
Professional Services
Manufacturing
Healthcare
Financial Services

Relevant Teams

Legal
Corporate Governance
Human Resources
Finance
Executive Leadership

Relevant Roles

Chief Executive Officer
General Counsel
Chief Financial Officer
Corporate Secretary
Board Members

Industries

Federal Antitrust Laws: Sherman Antitrust Act, Clayton Act, and Federal Trade Commission Act - crucial for ensuring restrictive covenants don't violate federal competition laws

Federal Securities Laws: Securities Act of 1933 and Securities Exchange Act of 1934 - governing registration, disclosure requirements, and transfer restrictions for shares

Defend Trade Secrets Act: Federal law providing uniform trade secret protection across states, crucial for confidentiality provisions

State Corporate Laws: State-specific regulations governing corporation formation, operation, and shareholder rights

State Non-Compete Laws: State-specific restrictions and requirements for non-compete agreements, including duration and geographic scope limitations

State Trade Secret Laws: State-level protections for trade secrets and confidential information, supplementing federal protections

Reasonableness Doctrine: Legal principle requiring restrictive covenants to be reasonable in duration, geographic scope, and scope of restricted activities

Blue Pencil Doctrine: State-specific rules on whether courts can modify (or 'blue pencil') overly broad restrictive covenants to make them enforceable

Non-Solicitation Requirements: Laws governing restrictions on soliciting employees, customers, or suppliers, including scope and duration limitations

Confidentiality Obligations: Legal framework for protecting confidential information, trade secrets, and proprietary information, including duration of obligations

Securities Registration Requirements: Federal and state requirements for registering securities and compliance with exemptions

Fiduciary Duties: Legal obligations of loyalty and care owed by shareholders in certain positions to the company and other shareholders

Employment Law Considerations: Fair Labor Standards Act and state employment laws affecting restrictive covenants in employment relationships

Constitutional Requirements: Constitutional considerations including interstate commerce, contract clause, and due process requirements affecting enforceability

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Restrictive Covenants Shareholders Agreement Template for United States

Let's create your Restrictive Covenants Shareholders Agreement