Safeguarding Your Business
Are you starting a new company or business?
Or expanding an existing enterprise?
If so, it is vital to have in place an Agreement with your shareholders.
Your Shareholders Agreement should specify the future conduct of shareholders to protect your legitimate business interests.
Shareholders Agreements provide stability and retain profitability for your business.
Non-Disparagement Clause
This clause prevents the shareholder from making any adverse statements about your business. Disparage also means detrimental, negative and damaging. This includes both written and verbal statements.
Non-Solicitation and Restraint of Trade Clause
This clause prevents the shareholder from approaching and luring any of your clients, employees or suppliers away from your business.
This clause is usually enforceable for up to a period of 12 months depending on the nature of your enterprise.
Restraint of trade or non-competition clauses will only be deemed valid if they are necessary to protect the legitimate business interests of the trader.
Legitimate interests that are commonly recognised as supporting a valid restraint include the employer’s confidential information or trade secrets, customers and clients of the business (business goodwill) and the employer’s staff.
In the case of Entello Pty Ltd v Firooztash [2016] QDC 050 the Court granted an injunction against a financial advisor who had breached a restraint of trade clause by soliciting his employer’s former clients.
Farr DCJ noted that ‘solicitation’ involves:
- Conveying a message to a client of his or her former employer that he or she would be willing to deal or do business with the client; and
- Encouraging the client to deal or do business with him or her.
The current legal position is that restraints of trade clauses are enforceable, when reasonable, and operate to protect the legitimate business interest.
It is very important that your Agreement protects your company and your business profile.
Need help?
Please contact our team of lawyers at The Quinn Group on (02) 9223 9166 or submit an online enquiry form today.
