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A sale of a business non-compete agreement is a restriction accepted by the seller of a business, preventing them from competing with the business they have just sold for a defined period.
Buyers ask for it because of what they are actually paying for. Much of a business’s value sits in goodwill — its customers, reputation, and relationships — and a seller who opens a rival next month takes that value straight back.
The restriction is typically negotiated as part of the deal rather than presented afterwards. It appears in the purchase agreement or as a separate deed signed at completion.
Restrictions given on a business sale are generally viewed differently from those imposed on employees, because the parties are commercial, advised, and exchanging value. That does not make them automatically enforceable, and how they are assessed still varies by jurisdiction.
Getting the list of covenantors right matters as much as the wording.
A restriction that binds only the selling company is often worth little. If the individuals behind the business are free to start again, the buyer has protected the wrong party.
A sale of a business non-compete agreement is defensible when it matches the business actually sold.
Tie the activity to the business’s operations. Restricting the seller from doing what the sold business did is arguable; restricting them from an entire adjacent sector they never operated in is harder to justify.
Tie the geography to where the business traded. Its actual customer footprint is the reference point, not the buyer’s ambitions.
Tie the duration to how long the goodwill takes to transfer. Customer relationships move to the new owner over a period, and that period is the argument for the term you choose. Longer is not automatically safer, since an excessive restriction may be narrowed or struck out.
Add non-solicitation alongside. Preventing the seller approaching customers, suppliers, and staff is often more practically valuable than the non-compete itself, and it is usually easier to defend.
Tip: Agree the restrictions before you agree the price. They are part of what the buyer is paying for, and raising them late in a deal turns a commercial term into a dispute.
The restriction should be drafted alongside the sale documents rather than bolted on.
Buyer, and each covenantor named individually.
The sale agreement, its date, and the business being sold.
What is given for the restriction, which in a sale is usually part of the purchase price.
Defined by reference to the business as carried on at completion.
The territory the business actually served.
The period, and when it starts — completion, or the end of any handover.
Customers, suppliers, and employees.
Permitted activities, passive shareholdings, and anything the seller retains.
What happens if part is unenforceable, which law applies, and signature blocks.
A seller has more leverage here than an employee, and should use it before completion rather than after.
Understand what you are giving up. A restriction may prevent you working in the field you know for years, which matters if you intend to keep working rather than retire.
Negotiate carve-outs. Consultancy, a specific client you want to keep, passive investments, or an adjacent activity you plan to pursue can all be excluded if raised in time.
Watch when the clock starts. A restriction running from the end of a two-year earn-out is far longer than one running from completion, and the difference is easy to miss.
Check who else is bound. If your co-sellers are accepting narrower restrictions than you, that is worth raising.
Take your own advice. The company’s lawyers act for the transaction, not for you personally, and a restriction on your future livelihood deserves someone looking at it on your behalf.
A sale of a business non-compete agreement should be drafted with the deal, not after it. Document Genius walks you through each section with simple questions.
Individuals as well as entities.
Everything else is measured against it.
Each matched to what the buyer actually acquired.
Completion or the end of any handover period.
Customers, suppliers, and staff.
On both sides, before signing. Start yours now and have a draft ready for review.
It is worth being clear why a sale of a business non-compete agreement and an employment restriction are not the same document.
The bargain is different. A seller receives payment for the business and its goodwill, and the restriction is part of what was purchased. An employee typically receives a job.
The parties are different. Sellers are usually commercially sophisticated and separately advised, which affects how a restriction is viewed.
The protectable interest is different. A buyer is protecting goodwill they paid for, which is a more concrete interest than an employer’s general wish to avoid competition.
None of that makes a sale restriction unlimited. An excessive covenant can still be narrowed or refused, and how these are assessed differs by jurisdiction.
Nothing on this page is legal advice, and no rule on enforceability, permitted duration, geographic scope, or how sale restrictions are assessed is stated anywhere on it. Take advice from a corporate or employment lawyer in the relevant jurisdiction before drafting or signing one.
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