A company's Articles of Association contained a non-compete provision prohibiting shareholders from conducting business with the company's customers in the company's field of business. The company filed for an injunction against a shareholder for breach of this provision and sued for pecuniary damages. The defendant's primary defense was that the non-compete clause amounted to a prohibited restriction on trade and breached the shareholder's basic freedom of occupation.
The Court rejected both arguments. The Court stated that Israel's antitrust laws are not aimed at prohibiting this type of provision, for there is rational to partners agreeing to not compete with one another. As a general rule, non-compete provisions contained in a company's Articles of Association prohibiting shareholders from competing in the company's field of business are valid.
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