Can a non-compete stop a seller from just investing money in a competing business?

It depends entirely on how the covenant is worded. Some non-competes are drafted broadly to prohibit the seller from having "any interest, direct or indirect," in a competing business, which is intended to capture passive investment along with active involvement, sometimes with a specific carve-out allowing a small, non-controlling stake in a publicly traded competitor. Other covenants are narrower and only prohibit the seller from "carrying on" or actively operating a competing business, which may leave more room for a purely passive investment that involves no active role.

Because purchase and sale non-competes given by a seller are reviewed more permissively by Ontario courts than employee non-competes, a broadly worded covenant capturing passive investment is more likely to be upheld here than it might be in an employment context, provided its scope, geography, and duration remain reasonable relative to the business interest being protected. A seller considering putting money into a competitor, even without an active role, should have the actual restrictive covenant reviewed first rather than assuming a passive stake is automatically safe.