Noncompete agreement

Noncompete agreement(경업금지) is a contract limiting a party from competing with a business after termination of employment or completion of a business sale.

Under Commercial Act Article 41, when a business transfers from one person to another, the former business owner may not open and run a same type of business in the same region for ten years even if no specific noncompete agreement was made. The same region means same Seoul Special Metropolitan City, Metropolitan City, or Shi/Kun, nor in any adjacent Seoul Special Metropolitan City, Metropolitan City, or Shi/Kun.

If the former and new owners of transferred business makes a specific noncompete agreement, the agreement lasts only for twenty years.

This provision intends to protect the business interest of the new owner and prevents actions in bad faith by the former owner.