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29/11/2013 PROFILE > Chef d'entreprise , Direction , Conseil en formalités

Transfer of commercial rights: terms and conditions for validity of a clause of non competition towards a member

A non competition clause, towards a member, is frequently accompanied by the transfer of company shares or titles. It stipulates the prohibition for the transferring member to compete with the company in future. Two accumulative conditions are required for the validity of such a clause: (1) it should be limited over time and space and (2) should be proportionate to the legitimate interests of the company to be protected.
Moreover, decision no. 12-25984 of the Commercial Chamber at the Court of Cassation of 8 October 2013 reaffirms that a non competition clause is not subject to the existence of financial counterparty. With one exception, in such instance as members or shareholders had, as at the date of their commitment, the capacity of employees of the company with which they committed not to enter into competition. If the transferor subsequently became an employee, the non competition clause is valid, even without financial counterparty.