Colorado Limits the Use of Non-Compete Agreements in M&A Transactions

Colorado has enacted legislation that will impact the ability of buyers in mergers and acquisitions transactions to restrict certain owners of a selling business from competing or soliciting clients. Prior to the most recent legislation in SB 25-083, non-competition and non-solicitation restrictions on business owners in the context of the sale of a business were deemed to be enforceable, so long as they were reasonable with respect to the geographic and temporal limitations. The new law now narrows the “M&A exception” to non-compete and non-solicitation restrictions.

Colorado generally disfavors restrictions that limit an employee’s ability to seek employment, but such limitations are subject to several exceptions. Colorado’s non-compete statute (Colorado Revised Statutes Section 8-2-113