Restrictive Covenants Shareholders Agreement Template for England and Wales

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Key Requirements PROMPT example:

Restrictive Covenants Shareholders Agreement

"I need a Restrictive Covenants Shareholders Agreement for my UK-based technology company with five founding shareholders, focusing particularly on protecting our intellectual property and customer relationships after any shareholder exit."

Document background
The Restrictive Covenants Shareholders Agreement is essential for companies seeking to protect their business interests from competitive activities by current or departing shareholders. This document, governed by English and Welsh law, becomes particularly crucial during ownership transitions, company sales, or when shareholders have access to sensitive information. It typically includes detailed provisions on non-competition, non-solicitation of customers and employees, and confidentiality obligations, all carefully drafted to ensure enforceability under UK law while balancing the company's protection with reasonable restrictions on shareholder activities.
Suggested Sections

1. Parties: Identification of all shareholders party to the agreement

2. Background: Context of the agreement and relationship between parties

3. Definitions: Key terms used throughout the agreement

4. Duration of Restrictions: Time period for which restrictions apply

5. Geographic Scope: Territorial limits of restrictions

6. Non-Competition Covenant: Specific prohibited competitive activities

7. Non-Solicitation of Customers: Restrictions on approaching company customers

8. Non-Solicitation of Employees: Restrictions on hiring company employees

9. Confidentiality: Protection of company confidential information

10. Governing Law: Specification of English and Welsh law governance

Optional Sections

1. Garden Leave: Terms for paid leave during notice period - use when shareholders are also employees

2. Intellectual Property Protection: Additional IP safeguards - use when company has significant IP assets

3. Non-Dealing Covenant: Broader restriction on any dealings with customers - use for higher-risk situations

4. Step-In Rights: Rights to take control of shareholder's interests - use for key shareholders or high-risk scenarios

Suggested Schedules

1. Schedule 1: Restricted Territory: Detailed geographic boundaries of restrictions

2. Schedule 2: Restricted Customers: List of specific customers covered by restrictions

3. Schedule 3: Restricted Business Activities: Detailed description of prohibited business activities

4. Schedule 4: Confidential Information: Detailed categorization of protected information

5. Appendix A: Deed of Adherence: Template for new shareholders to join agreement

Authors

Alex Denne

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

Relevant Industries
Relevant Teams
Relevant Roles
Industries

Companies Act 2006: Primary legislation governing company law in England and Wales, particularly focusing on sections relating to shareholders' rights and company management

Competition Act 1998: Legislation ensuring restrictive covenants don't breach competition law and regulating anti-competitive practices

Enterprise and Regulatory Reform Act 2013: Legislative framework impacting competition law and business regulations that must be considered in restrictive covenants

Restraint of Trade Doctrine: Common law principle requiring covenants to be reasonable in duration, geographic scope, and scope of restricted activities while protecting legitimate business interests

Nordenfelt v Maxim Nordenfelt [1894]: Landmark case law establishing basic principles for reasonable restraint in restrictive covenants

TFS Derivatives v Morgan [2004]: Modern case law providing contemporary interpretation of reasonable restrictions in covenants

Tillman v Egon Zehnder Ltd [2019]: Recent Supreme Court case providing updated guidance on the interpretation and enforcement of restrictive covenants

Human Rights Act 1998: Legislation protecting fundamental rights including the right to work and earn a living, which must be balanced against restrictive covenants

Employment Rights Act 1996: Relevant legislation when shareholders are also employees of the company, affecting the scope and enforcement of restrictive covenants

Partnership Act 1890: Legislation that may be relevant when restrictive covenants involve partnership structures or partnerships converting to companies

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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