Non-Compete Clauses with JV Partners After Exit is the clause that only starts working after the relationship has ended: a departing partner who takes clients, staff and know-how away to a competing business is the scenario every venture must plan for. This article analyses non-compete clause joint venture exit under current Vietnamese law at the time of writing, grounded in primary sources and real joint venture practice.
Current Legal Framework
A post-exit non-compete between partners is a civil bargain with no dedicated article in Law on Enterprises 59/2020/QH14; its validity is tested under civil freedom of contract while respecting Competition Law 23/2018/QH14 on prohibited competition-restricting agreements.
Unlike an employee’s non-compete under Labour Code 45/2019/QH14, a joint venture partner is an independent business, so the restraint may be broader, yet it still needs a reasonable scope of business, territory and duration to stand a real chance before a court or arbitral tribunal.
Where the exiting foreign investor re-enters through a new project, that project must still meet market-access conditions under Investment Law 143/2025/QH15 and the restricted-access list issued with Decree No. 96/2026/ND-CP.
Practical Analysis and Risks
Reasonable scope is measured on three axes: products or services directly competing with the venture, the territory where the venture actually operates, and a duration commonly of two to three years after exit; a nationwide, unlimited ban across loosely related fields is the structure most likely to be partially struck down.
An enforceable clause needs a clear definition of indirect competition: founding a new company, investing in a rival, advising a rival, or soliciting key customers and staff; without that definition, the breaching party will always argue its activity sits outside the ban.
Sanctions should be an agreed penalty plus provable damages, with a right to demand cessation of the breach; a penalty wildly disproportionate to the value of the stake sold risks being trimmed by the dispute-resolution body.
A French investor exiting a Hanoi specialty-foods venture accepted a two-year non-compete limited to imported cheese distribution in northern Vietnam; when it quietly funded a rival importer in Hai Phong, the tribunal enforced the clause precisely because its scope had been kept narrow and measurable.
Split the protections into three independent clauses: non-compete, non-solicitation and confidentiality; if one limb is partially invalid, the other two survive instead of collapsing together.
An exiting partner will usually ask carve-outs for pre-existing businesses and passive holdings below a small percentage in listed companies; recording those carve-outs openly makes the clause more realistic and more readily accepted.
Action Checklist for Investors
- Limit the ban by product, territory and a concrete duration
- Define direct and indirect competition, including staff solicitation
- Tie penalty and damages to the value of the exit transaction
- Separate the non-compete from perpetual confidentiality duties
- Preserve loss evidence as soon as competing conduct appears
Frequently Asked Questions
Is a non-compete clause with a partner after I exit legally enforceable?
It is enforceable if voluntarily agreed, limited to a reasonable business scope, territory and duration, and not a prohibited competition-restricting agreement under the Competition Law. An over-wide or perpetual ban risks partial non-recognition by a court or tribunal in a dispute.
What scope and duration of non-compete is reasonable?
Two to three years after exit is the usual reasonable range, confined to directly competing products or services and the territory where the venture actually operates. A longer period needs a special reason, such as a long technology cycle or an exit price that expressly included substantial goodwill.
What is the penalty for breaching a non-compete commitment?
Breach can trigger the agreed contractual penalty, compensation for provable actual loss and an order to stop the competing conduct. For sanctions to be applied in full, the penalty should be proportionate to the exit deal value and loss evidence should be gathered early.
Additional practical note 1 on non-compete clause joint venture exit: before signing, investors should reconcile the agreed position against the company’s current charter, its investment registration file and commitments to third parties, and keep that reconciliation in the deal file so that when the investment registration authority, a bank or auditors ask for an explanation, the company has a consistent record instead of having to reconstruct a past decision.
Additional practical note 2 on non-compete clause joint venture exit: before signing, investors should reconcile the agreed position against the company’s current charter, its investment registration file and commitments to third parties, and keep that reconciliation in the deal file so that when the investment registration authority, a bank or auditors ask for an explanation, the company has a consistent record instead of having to reconstruct a past decision.
This article has been quality-reviewed by the FLAW AI Legal Council