# Economic Group > Economic Group means a collection of legally distinct entities interconnected by investments, strategic collaborations, and shared economic interests. **Term:** Economic Group **Last updated:** 2026-07-29 ## Definition ## What Economic Group Means in a Contract An Economic Group is a defined term used in contracts to capture entities that, while legally distinct, function as a connected economic unit. This connection can arise from common shareholders, cross-investments, joint ventures, or ongoing strategic collaborations. Contracts use this concept when a party's obligations or restrictions should logically extend to affiliated companies that share the same economic interests, even though those affiliates are not direct signatories. The purpose of including this concept is to prevent circumvention. If a contract only bound the named signatory, that party could route restricted activities through a related company and technically comply with the letter of the agreement while violating its spirit. By defining an Economic Group, drafters close this loophole and ensure that commitments like confidentiality, exclusivity, or non-solicitation apply across the wider network of connected businesses. ## How Economic Group Is Defined or Measured There is no single universal formula for identifying an Economic Group, so contracts typically spell out the criteria in the definitions section. Common indicators include a minimum percentage of shared ownership or voting rights, common directors or officers, contractual arrangements that create shared economic risk, or a pattern of coordinated commercial decision-making between the entities. Some agreements borrow language from company law concepts such as control, affiliate, or subsidiary, then broaden or narrow those concepts to fit the deal. Others focus purely on economic substance rather than legal structure, looking at whether entities share profits, losses, or strategic direction regardless of formal ownership thresholds. - Direct or indirect equity ownership above a stated threshold - Common control through voting rights or board composition - Formal joint ventures or strategic alliances - Shared financial exposure through guarantees or profit-sharing arrangements ## Where Economic Group Appears in Agreements The term commonly appears in commercial contracts where the parties want restrictions or benefits to travel with an entire corporate family rather than a single company. It shows up in exclusivity and non-compete clauses, confidentiality obligations, financial covenants in lending arrangements, and disclosure requirements in mergers or investment agreements. It is also relevant in arrangements involving shared infrastructure or resources, such as a