Source: Freeths LLP via Mondaq, 29 March 2017
“Restrictive covenants are commonplace in contracts where one party is selling their business.
They are a contractual safeguard ensuring valuable stakeholders are not poached from a business by an ex-employee entering into competition with their old place of work.
Yet, while they are frequently incorporated into commercial contracts, the recent case involving a dispute between a national hairdressing chain and a local franchisee owner Rush Hair Ltd v Hayley Hayley Gibson-Forbes and S.J. Forbes Limited brought to light a number of issues in the context of franchising and Share Purchase Agreements:
- How long can you restrict another Party from setting up in competition?
- Can you prevent them also from enticing staff away, and if so, for how long?
- Can an individual hide behind a company structure to avoid any restrictions?”