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Committee advances bill to allow non‑competes among co‑owners of closely held businesses
Summary
The Senate Commerce and Energy Committee gave a do‑pass recommendation to House Bill 1180, which clarifies that co‑owners of partnerships and closely held entities may include valid non‑compete terms in governing documents and buy‑out agreements.
Representative Will Mortonson, sponsor of House Bill 1180, told the Senate Commerce and Energy Committee the measure is a narrow clarification to South Dakota contract law that would allow co‑owners of jointly owned businesses to include non‑compete terms in partnership agreements, operating agreements and buy‑out provisions. Mortonson said the change is not aimed at employer‑employee non‑competes but at co‑owner arrangements such as small local businesses where owners want certainty if one party exits.
Mortonson said current code contains default restrictions on restraints of trade and that the bill simply clarifies existing contract freedom for co‑owners in certain sale or buy‑out situations. Committee members asked whether current law already allows similar arrangements; the sponsor said existing exceptions are limited (for example, goodwill sales or dissolution) and that the bill provides clearer statutory authorization.
The committee approved a do‑pass motion for HB 1180. The secretary called the roll and the chair announced the bill passed the committee and will be placed on the consent calendar for further floor consideration.
