If you are a company and you are not based in California, you should encourage your employees to sign non-compete contracts. Think about what you want to protect and design the agreements accordingly. Under Section 27 of the Indian Contract Act, 1872, an agreement to restrict trade and activity is undying. The derogation from Section 27, which is important for investments on the basis of shareholder agreements/share purchase agreements, provides that agreements in which the seller`s good value is sold are not affected by the section 27 ban. Therefore, when it comes to implementing non-compete clauses in shareholder agreements and share purchase agreements, it is essential to demonstrate that the good value of the company has been transferred by the equity company to the benefit of the investor. On the one hand, the employee generally wishes to honour her contract, even if the contract seems a little presumpinable and a lawyer says it may not be applicable. It therefore chooses a new job that does not violate the non-competition agreement if it can. With such non-competition clauses, both in shareholder agreements, in the share purchase agreement and in the employment contract, the investor tries to prevent the promoters of the participating entity from creating a competing company. However, the most difficult part is the application of such competition bans.

The question that often arises is to what extent these competition provisions apply to these promoters who, in many cases, may be serial contractors. Therefore, with respect to employment contracts, workers are prohibited from committing a business similar to that of the employer beyond the duration of the employment or which is in competition with it. A non-compete clause in an employment contract can be applied as long as the employment contract – for current use a separate agreement with a promoter of the entity that is part of the project – is valid and valid. In view of the section 27 prohibition, non-competition prohibitions in an employment contract that is no longer imposed after the termination of the employment contract cannot be enforced. Therefore, in some cases, the non-compete clause of the employment contract may not be available, but the clause may be applied in the context of the share purchase contract.