Why Engage Legal Counsel for Drafting Contracts in Business Sale or Acquisition?
Undertaking the purchase or sale of a business constitutes a significant decision. Nonetheless, if executed at the opportune moment, both endeavors hold the potential for substantial rewards.
A crucial factor to consider pertains to the presence of legally binding contracts that bear implications for the businesses involved in the transaction. Overlooking such contracts could result in consequential expenditures of time and resources. This underscores the paramount importance of seeking legal counsel when navigating business transactions. Notably, non-compete agreements represent a pertinent category of contracts warranting meticulous attention when contemplating the acquisition or divestiture of an ongoing enterprise.
Significance of Non-Compete Agreements
Non-compete agreements typically find their inception in the early stages of business associations. For instance, when a company onboards a new employee, a non-compete clause may constitute an integral component of the employment contract. By entering into such agreements, employees generally pledge to refrain from engaging in competitive activities against their employer, both during the course of employment and following its termination, for a predetermined timeframe. This prohibition extends to activities such as divulging trade secrets or furnishing other proprietary information to competitors.
Enforcement Parameters of Non-Compete Agreements
It is imperative to note that non-compete agreements cannot possess boundless scope. For instance, they cannot indefinitely prevent former employees from joining enterprises of a similar nature. Typically, a temporal limitation ranging between 6 months and 2 years is deemed reasonable and enforceable.
Moreover, non-compete agreements encompassing an expansive geographical ambit, such as precluding former employees from engaging in work across multiple states, face heightened challenges in terms of enforceability. Striking a balance between safeguarding the business’s interests and avoiding undue impediments upon the employment activities of the workforce is of paramount significance.
The Crucial Role of Legal Counsel
For sellers of businesses, ensuring the enforceability of non-compete agreements becomes imperative. Concurrently, purchasers of businesses seek to ascertain that the operational latitude of their newly acquired team remains judiciously unencumbered. The optimal approach to addressing these considerations is through the engagement of legal counsel. A proficient legal team is adept at unveiling extant contractual arrangements, elucidating their stipulations, and potentially facilitating their modification.
Our firm extends assistance to business proprietors navigating prospective acquisitions or sales. We welcome you to reach out for a consultation, wherein we can provide further insights into these matters.