Protect a Chinese business against competition from a related company with this Non-Competition Agreement for China.
- This agreement is between a company and its controlling shareholder, both of whose primary businesses are similar and therefore are likely to compete with each other.
- The corporate shareholder agrees not to participate in or operate any business within China that is within the business scope of the company.
- The shareholder will make any business opportunity that comes its way available to the company.
- During the term of the Agreement, the company will have a right of first refusal to acquire any legitimate new business developed by the shareholder.
- This Chinese legal form is available in English language version only. A Chinese version of the document may also be required for it to be legally enforceable.
The Non-Competition Agreement for China template is prepared in accordance with the laws of the PRC. It is a downloadable MS Word document that can be edited to fit your unique circumstances.
NON-COMPETITION AGREEMENT by and between [NAME OF PARTY A] and [NAME OF PARTY B] DATE: ____________ NON-COMPETITION AGREEMENT This Non-Competition Agreement is entered into on ___________ [insert date], in ________, China by and between the following two parties: Party A: [NAME OF PARTY A], a _________________ [describe form of company] duly organized and existing under the laws of the People’s Republic of China, with its address at ___________________________. Party B: [NAME OF PARTY B], a _________________ [describe form of company] duly organized and existing under the laws of the People’s Republic of China, with its address at ___________________________. WHEREAS: 1. Party A is a company specializing in the provision of _____________ services; 2. Party A, in its capacity as the sole promoter, incorporated Party B on the ______ day of _______________, ________, and Party B’s primary business is also ______________________; 3. Party B plans to publicly offer its shares in _________________________ [insert where shares will be offered] and expects that upon completion of such offering, Party A will remain as its controlling shareholder; and 4. Both parties acknowledge that their primary businesses compete with each other. NOW THEREFORE, to avoid competition, Party A and Party B hereby agree on the following terms and conditions and agree to perform this Agreement according to such terms and conditions: ARTICLE 1 – SCOPE OF NON-COMPETITION 1.1 The scope of the non-competition referred to in this Agreement includes _______________________________________________ [list the business services that are subject to non-competition] and other businesses that may compete with the primary business of Party B. 1.2 Any change to the scope of non-competition of this Agreement shall only be made in writing by the parties. ARTICLE 2 – COMMITMENTS OF PARTY A 2.1 Except as stated in Article 3, during the term of this Agreement, Party A shall not, without Party B’s prior written consent, cause, either directly or indirectly, each of its affiliates not to engage in, participate or operate within the territory of China, any business that is within the business scope of Party B and its affiliates as set forth in Article 1. 2.2 In the event that Party A is offered any business opportunity which involves business that is similar to, or the same as, the primary business of Party B or its affiliates, and if such business opportunity may directly or indirectly compete or lead to competition with the business of Party B, Party A shall immediately provide Party B with written notice thereof and shall use its best -3- efforts to make such business opportunity available to Party B on the terms and conditions that are no less favorable to that offered to Party A, its affiliates and any third parties. 2.3 Party A shall grant Party B a right of first refusal under the same condition to purchase any legitimate new business developed by Party A. ARTICLE 3 – SHARES CURRENTLY HELD BY PARTY A 3.1 Party A undertakes that, within _____________________ (_________) [insert the number of years in both words and numerals] years of Party B’s listing on the _________________ Stock Exchange (the “Buyout Period”), it shall assign all the shares it currently holds in ________________________________ [insert company name] (the “Company”) to a third party, or it shall seek other means to avoid any possible competition between the business of the Company and Party B. ARTICLE 4 – TERM 4.1 This Agreement shall become effective upon signing by both parties and shall remain effective until one of the following occurs: (a) Party A holds, either directly or indirectly, less than ________________ percent (_______%) of the voting power, as represented by the ownership interests of Party B, which Party A may exercise, or cause to be exercised, at Party B’s shareholders meeting, and ceases to control the majority of Party B’s board of directors; or (b) Party B’s shares cease to be listed on the ___________________ Stock Exchange or any other stock exchange. 4.2 During the term of this Agreement, in the event of breach of this Agreement by any party, the other party may terminate this Agreement by written notice if the breaching party fails to cure the breach within ________________________ (_____________) [insert the number of days in both words and numerals] days of the receipt of written notice from such other party. 4.3 This Agreement may be extended to any term agreed by the parties in writing. ARTICLE 5 – REPRESENTATIONS AND WARRANTIES 5.1 Each party hereto represents and warrants that: (a) it has obtained any and all government approvals and internal delegations of authority for the valid execution of this Agreement, and that the Agreement will be executed by its authorized representative to the effect that upon such execution, this Agreement shall be legally binding upon the parties; and (b) The execution of this Agreement and the performance of the obligations hereunder shall not violate any laws, regulations or other agreements and bylaws of such party. ARTICLE 6 – BREACH OF AGREEMENT 6.1 In the event of default by any party hereto on its obligations provided in this Agreement, the defaulting party shall, upon receipt of a written notice from the non-defaulting party requesting the correction, immediately refrain from such default and shall compensate the non-defaulting -4- party for all losses and damages thus caused to the non-defaulting party within ________________________ (_________) [insert the number of days in both words and numerals] days of the notice. Should the defaulting party continue its breach or fail to perform its obligations, the non-defaulting party shall have the right, in addition to the right to claim for compensation for its losses due to such breach of agreement, to the early termination of this Agreement. 6.2 In the event that the parties hereto are both at fault, then they shall bear the respective liabilities for the breach in accordance with the actual faults committed by the parties. ARTICLE 7 – WAIVER 7.1 Except for the obligation of compensation provided herein, no party shall be liable for any contingent, consequential, special or punitive damages, or other damages of the other party arising from, or in connection with, this Agreement, whether or not alleged to be the result of contracts or infr
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