This practical guide explains whether and how to draft enforceable seller non‑competes in Swedish M&A (2026), covering enforceability, competition‑law limits, recommended durations, sample SPA clauses and negotiation checklists for buyers and sellers.
Non-compete clauses Sweden M&A drafting has become a sharper compliance concern in 2026 as competition scrutiny of restrictive covenants continues across the EU and within Sweden. Buyers still need protection for the goodwill and future revenue they are paying for, but a covenant that reaches too far in scope, geography or duration risks being unenforceable and, worse, being treated as an anticompetitive agreement. Sellers, meanwhile, want to preserve their ability to work and to secure fair value for accepting a restraint. This guide sets out the legal foundations, the competition-law limits on ancillary restraints, recommended durations, and sample SPA clause language, so deal teams can draft covenants that survive both contract-law and competition-law review.
It is general guidance only; every transaction requires tailored legal advice.
Understanding non-compete clauses Sweden M&A drafting starts with the interaction between contract law, employment law and competition law. Each layer imposes a distinct test, and a covenant must survive all three to be reliable.
The starting point is freedom of contract. Under the Swedish Contracts Act (Lag (1915:218) om avtal och andra rättshandlingar på förmögenhetsrättens område, commonly “Avtalslagen”), parties are broadly free to agree restrictive terms, and a negotiated restraint between sophisticated commercial parties will generally be respected. However, the Contracts Act also contains a general adjustment mechanism (notably section 38 on restraint-of-trade undertakings, and the general unfair-terms provision in section 36) that allows a court to modify or set aside an unreasonable term. In practice, a restraint that is disproportionate, for example, one that lasts far longer than needed or covers activities unrelated to the acquired business, is exposed to reduction.
Drafting for enforceability therefore means drafting for reasonableness from the outset rather than relying on a broad clause and hoping it holds.
The analysis changes when the seller is also an employee. Lag (1982:80) om anställningsskydd (LAS), the Employment Protection Act, together with the collective-agreement framework and general principles on post-employment restraints, impose stricter limits on covenants imposed on employees than on covenants agreed between a buyer and a business owner selling their company. A restraint accepted by a shareholder-seller as part of the sale of goodwill is treated more favourably than one imposed purely in an employment relationship. Deal teams should identify early whether a departing individual is being restrained as a vendor of the business, as a continuing or departing employee, or both, because the applicable standard, and the level of scrutiny, turns on that characterisation.
Swedish courts assess restraints against the legitimate interest they protect. In the M&A setting, the recognised legitimate interest is the value the buyer has paid for: goodwill, customer relationships, know-how and the ability to earn a return on the acquisition. A restraint that protects that value, is limited to the business actually acquired, and does not last longer than needed to secure the transfer of goodwill is far more likely to be upheld. Restraints that operate mainly to suppress competition, rather than to protect transaction value, run into both public-policy limits under contract law and the prohibition on anticompetitive agreements. The consistent message from practice is that proportionality and necessity are the decisive factors.
The competition-law layer is where many broadly drafted non-compete clauses Sweden M&A covenants fail. A restraint that is acceptable as a matter of contract can still be void if it amounts to an anticompetitive agreement that is not saved by the ancillary restraints doctrine.
Article 101 TFEU prohibits agreements that restrict competition. A seller non-compete plainly restricts the seller’s freedom to compete, so it needs a route to legality. That route is the ancillary restraints doctrine: a restraint that is directly related and necessary to the implementation of a concentration is treated as part of the transaction and is not separately prohibited. The European Commission’s Notice on restrictions directly related and necessary to concentrations addresses non-compete obligations in the context of business sales and sets out how their scope, geography and duration are assessed.
Applied to a sale of business, the doctrine accepts that a buyer needs a period of protection to absorb the goodwill and customer base it has acquired, but only for as long, and over as wide an area and range of activities, as is genuinely necessary. As a general guide in that Notice, non-compete clauses are typically regarded as justified for periods of up to two years where only goodwill is transferred, and up to three years where the transfer includes know-how. Anything beyond that necessary core loses ancillary protection and is exposed to challenge.
The Swedish Competition Authority (Konkurrensverket) enforces the Competition Act, Konkurrenslag (2008:579), which mirrors the EU prohibition on anticompetitive agreements in Chapter 2. In assessing restraints attached to transactions, the Authority looks at whether the restraint is genuinely tied to the transfer of the business and whether its scope, geographic reach and duration are proportionate to protecting the value being transferred. Restraints that extend to products, services or territories the target never operated in, or that continue well beyond the period needed for the buyer to secure customer loyalty, attract scrutiny.
For deal teams, the practical point is that Konkurrensverket applies substantially the same necessity-and-proportionality logic as the EU framework, so a covenant drafted to EU ancillary-restraint standards will generally also satisfy Swedish competition analysis.
Enforceable seller non-competes are built component by component. Each element should be drafted to the minimum necessary to protect transaction value, because every extension beyond that increases both contract-law and competition-law risk. The clause options below are transactional drafting examples only and should be reviewed by qualified Swedish counsel before use.
Start the covenant with a recital of purpose. State that the restraint is granted to protect the goodwill, customer relationships and know-how transferred to the buyer under the agreement, and that the parties consider it necessary and proportionate for that purpose. This does two jobs: it anchors the restraint to a recognised legitimate interest under Swedish contract law, and it signals the ancillary-restraint justification a competition assessment will look for. A well-drafted purpose recital is not window dressing; it frames every subsequent limb of the covenant and gives a court or regulator the rationale for treating the restraint as legitimate.
Scope is where covenants most often overreach. Define the restricted activity by reference to the business actually acquired, described by its products, services or business lines, rather than by broad labels that could capture unrelated markets. A narrow approach restricts the seller from “carrying on or being engaged in a business that competes with the Business as carried on at Completion”. A functional approach lists the specific product or service categories. Always include carve-outs, for example, permitting the seller to hold a small passive shareholding in a listed competitor, or to continue a genuinely separate activity that was never part of the target.
Carve-outs reduce the risk that the covenant is read as an attempt to remove the seller from the market entirely, which is precisely the outcome competition law resists.
Territorial reach must track where the target actually did business. If the acquired company traded only in Sweden and Norway, a covenant covering the whole EU is vulnerable. Define the restricted territory by reference to the markets served by the business at completion, and avoid open-ended language such as “worldwide” unless the target genuinely operated globally. Where the business is online or has no clear geographic footprint, define the territory by reference to the customer base actually served rather than by notional borders. A geographic limit that matches commercial reality is both easier to defend and easier to enforce.
There is no statutory maximum, but transactional practice in Sweden generally sits between six and twenty-four months for seller non-competes. A period at the shorter end of that range is comfortably defensible where the buyer’s protection concerns are limited to customer goodwill. Periods approaching or exceeding two years typically require justification tied to the transfer of substantial know-how, long customer cycles, or a continuing relationship with the seller during a transition. As a working benchmark, keep the duration proportionate to the time it will realistically take the buyer to secure the relationships and knowledge it acquired. The longer the period, the stronger the documented commercial justification needs to be, both for contract-law reasonableness and for ancillary-restraint compliance.
Where a longer restraint is commercially essential, a common approach is to tier the covenant, with a broad restraint for an initial defensible period followed by a narrower non-solicit tail.
In a business sale, the consideration for the restraint is usually embedded in the purchase price, and the recital should say so. Where the seller is also giving up employment income or accepting a lengthy or wide restraint, separate compensation strengthens enforceability, because a restraint that is paid for is more readily seen as reasonable. Compensation models include an allocated portion of the purchase price, a periodic payment during the restricted period, or garden-leave-style arrangements where the seller remains engaged. Documenting real consideration reduces the risk that a court adjusts the term as one-sided under the Contracts Act.
Provide expressly for the remedies the buyer expects: injunctive relief to stop a breach, and damages, ideally with an agreed measure or a liquidated-damages (contractual penalty, “vite”) provision to ease proof of loss. Include a severability clause and, where appropriate, a provision inviting a court to enforce the covenant to the maximum reasonable extent if part is found excessive. Note that under Swedish law a court applying section 38 of the Contracts Act may itself reduce an unreasonable restraint to a reasonable level, and there is no guaranteed “blue-pencil” outcome. Severability does not cure a fundamentally overbroad restraint, but it can preserve a defensible core where one limb is struck down.
Pairing clear remedies with a proportionate substantive restraint is what makes a covenant both enforceable and worth enforcing.
A full non-compete is not always the best tool. Where competition-law risk is high or the seller resists a broad restraint, a combination of non-solicitation and confidentiality can protect the buyer’s core interests with far less enforceability risk. The table below summarises the practical and legal differences.
| Feature | Non-compete | Non-solicitation | Confidentiality |
|---|---|---|---|
| Restricts | Competing activities and business lines | Approaching or poaching customers or employees | Use or disclosure of confidential information |
| Typical duration in Sweden | Shorter; 6–24 months (transaction dependent) | 12–36 months common | Indefinite for trade secrets, otherwise limited |
| Enforceability risk | Higher, more scrutiny under competition law | Lower, often proportionate | Lowest, standard commercial requirement |
| Remedies | Injunctions, damages, compensation | Damages, specific performance | Damages, injunctive relief |
| When to use | Protect goodwill and post-sale value when properly limited | Protect customer and employee relationships without blocking trade | Protect confidential information, baseline |
Where a full non-compete would be hard to justify, for instance because the seller’s continued participation in the wider market cannot fairly be prevented, draft a layered restraint instead. Combine a tightly defined non-solicitation of the acquired business’s key customers and employees with a robust confidentiality covenant protecting trade secrets and know-how (supported by the Swedish Trade Secrets Act, Lag (2018:558) om företagshemligheter). This package often delivers most of the buyer’s practical protection, keeps the seller free to earn a living, and presents a much lower competition-law profile. In many mid-market deals, non-solicit plus confidentiality is the pragmatic answer rather than a broad non-compete that invites challenge.
Non-compete clauses Sweden M&A negotiations tend to follow predictable lines. Anticipating the other side’s priorities lets deal teams reach a proportionate, enforceable outcome without protracted argument.
The typical landing zone trades duration against breadth: a buyer will often accept a shorter period in exchange for a clearly defined scope, while a seller will accept a firm restraint in exchange for defined carve-outs and fair compensation.
The recurring failures are predictable. Overbroad scope that captures activities the target never carried on; vague or open-ended geography such as unqualified “worldwide” language; excessive duration without documented justification; and a complete absence of stated consideration where the seller is also giving up employment. Each of these invites either adjustment under the Contracts Act or challenge as an anticompetitive agreement. A covenant riddled with these features may be worse than none, because it can be struck down or heavily reduced, leaving the buyer under-protected.
Where a covenant is proportionate and clearly drafted, Swedish courts will generally enforce it and interim measures may be available to address an ongoing breach. Enforcement nonetheless carries cost and time, and courts will not rescue a fundamentally excessive restraint, they may instead reduce it under section 38 of the Contracts Act. The practical enforcement reality reinforces the drafting message: a narrow, well-justified covenant is not only more likely to be upheld but also easier and quicker to enforce when it matters. Investing in tight drafting at signing reduces litigation risk later.
The following are transactional drafting examples only and must be tailored and legally reviewed before use. Each reflects a different balance of protection and risk.
Tailoring notes: always define “the Business” by reference to the target’s actual products, services and markets; align territory to real operations; and record the necessity rationale in a purpose recital. The broader the restraint, the stronger the compensation and justification must be.
Drafting effective non-compete clauses in Swedish M&A deals depends on discipline: tie the restraint to the value transferred, keep scope, geography and duration to what is genuinely necessary, document the justification, and provide fair consideration and clear remedies. Where a full non-compete is hard to justify, a layered non-solicitation and confidentiality package often delivers the protection a buyer needs with far less enforceability risk. For timing and scoping of specialist advice, see When to hire an M&A lawyer, Sweden, and explore related resources on non-solicitation and confidentiality clauses in Swedish SPAs. Every restraint should be reviewed by qualified Swedish counsel before signing.
This article was produced by Global Law Experts. For specialist advice on this topic, contact Göran Andersson at Hellström, a member of the Global Law Experts network.
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