Non Compete ????

[jalla]

Wondering if anyone can give us some general advise here, we will be speaking with a legal advisor next week, but we're keen to try to understand the position as soon as possible.

My partner left her job about 3 months ago, and she is now planning to open up her own shop. However, she has a very small shareholding in her previous place, (about 3%) which is a small private limited company. This was given to her over 10 years ago........

Last week, one of her friends asked if her old boss is annoyed at her opening a competitive shop (they are not really in the same catchment area)..........this prompted her to dig out her shareholders agreement and she has found a non-compete clause, saying that she can't pursue a competitive business for at least 1 year after she gives up her shares.....

The question is how enforceable is a clause like this ? We have already paid our deposit in the new unit and are due to kit out in about 2 weeks, trying to be open for December.

Any thought welcome .....

Thanks,

Jalla

 

[johnflan]

Some points need clarification here.

1. Is her old boss aware she left the business because she is setting up a competing business.

2. Does she still own the 3% share in the original business.

If I was her I'd take my chances and if her old company wants to sue her then let them try. I'm not a lawyer but taking into account the brief info you've posted I doubt if the noncompete clause is enforecable.

There are always ways to get round these things - she could for example set up a new company , appoint you as a director but not her - she could act as a consultant to the new business - when the heat dies down she could then become a director etc etc

 

[jalla]

John,

1.Don't think her old boss knows yet.... however, I think she will know very quickly after we start.

2.Yes, she still has the 3%....

As a matter of interest, why do you think it is unenforceable ? Interetsed in your opinion ?

We thought about the compnay set-up but the clause actually says that she can;t be involved at all.....

I wonder what worstcase scenario is if we go ahead ? Anyone ever had experience of this ?

Cheers,

J

 

[Vanilla]

Non-compete clauses can be hard to enforce. The more strict the clause the harder to enforce. So a reasonable clause might be for a relatively short period of time in a certain catchment area. However if a clause strives for non-compete for ever, everywhere, then it will be practically unenforceable. That is the general gist, your friend should take legal advice from an employment law specialist. Having said that, you really don't have anything to lose at this stage if you have already put the money into the new business...