This bill introduces a new section to chapter 53-9 of South Dakota law, specifically addressing the validity of non-compete agreements in the context of jointly owned business entities. It allows parties involved in a business entity to include provisions in their governing documents or in contracts related to the purchase, sale, or transfer of ownership interests. These provisions can stipulate that an owner, after transferring their interest, is prohibited from engaging in the same or similar business activities as the entity for a specified period, not exceeding three years, and within a defined geographic area where the entity operates.

The bill aims to clarify and reinforce the enforceability of non-compete agreements among business owners, ensuring that such agreements are legally recognized and can be upheld in the event of ownership changes. This legislative change is intended to protect the interests of business entities by preventing former owners from competing directly with the business after they have divested their ownership.