The Restrictive Trade Practices (Sale and Purchase and Share Subscription Agreements) (Goods) Order 1989

Explanatory Note

(This note is not part of the Order)

The Restrictive Trade Practices Act 1976 requires that restrictive agreements between two or more persons carrying on business in the United Kingdom in the supply of goods be furnished to the Director General of Fair Trading for registration.

This Order exempts from the registration requirements of the 1976 Act agreements for the sale and purchase of shares in a company or of a business (“Sale and purchase agreements”) and agreements for the subscription of shares in a company (“Share subscription agreements”) provided that the agreements satisfy certain conditions.

In the case of sale and purchase agreements the main conditions are (articles 3 and 4)—

(a) that more than 50 per cent in nominal value of the issued share capital of the company be transferred to one purchaser or to more than one where they are all members of the same group of companies, or (as the case may be) that the whole of the vendor’s interest in a business be transferred to one or more purchasers;

(b) that the agreements only contain registerable restrictions of the type described in section 6(1)(c) to (f) of the 1976 Act;

(c) that such restrictions only be accepted by vendors, their associated companies, or by individuals (save that bodies corporate or unincorporate cannot accept such restrictions where they are also purchasers under the agreement in question);

(d) that the restrictions to be disregarded only limit the extent to which the persons accepting them may compete with the company or business which is the subject of the sale, or be involved in or assist any business which so competes; and

(e) that the restrictions to be disregarded only be operative for a period not exceeding 5 years beginning with the date of the agreement or a period beginning with the date of the agreement and ending 2 years after the date of expiry or termination of the relevant employment or services contract, whichever is the later.

In the case of share subscription agreements the main conditions are (articles 5 and 6)—

(a) that the agreements only contain registerable restrictions of the type described in section 6(1)(c) to (f) of the 1976 Act;

(b) that such restrictions only be accepted by individuals;

(c) that the restrictions to be disregarded only limit the extent to which the persons accepting them may compete with the issuing company or be involved in or assist any business which so competes; and

(d) that the restrictions to be disregarded only be operative for a period not exceeding 5 years beginning with the date of the agreement or a period beginning with the date of the agreement and ending 2 years after the relevant person ceases to be a member of the issuing company or after the date of expiry or termination of the relevant employment or services contract, whichever is the later.