News and Insights

News

Our latest news and deal insights.

Filter by clicking on the category links.

Restrictive Covenants in Shareholders’ Agreements

Restrictive Covenants in Shareholders’ Agreements

The recent case of Guest Services Worldwide Limited v Shelmerdine [2020] EWCA Civ 85, sets a reminder that restrictive covenants which apply to an “employee shareholder” will continue to apply to them when they cease to be an employee but remain a shareholder. The Court of Appeal ruling was made on the basis that when these restrictive covenants are read in their factual and commercial context, it is clear they are intended to protect the company, its goodwill and the value of its shares.

It was also held by the Court of Appeal that restrictive covenants of 12-months on “employee shareholders” following cessation of their employment was not unreasonable on the basis that this is to protect a company’s legitimate interest by preventing "Employee Shareholders" from enticing away clients and business.

Careful drafting is required to ensure that restrictive covenants would not however be unenforceable on the basis of their scope and territory. If you are concerned about the enforceability of your restrictive covenants on “Employee Shareholders”, Avery Law can review, advise on and assist in drafting restrictive covenants in shareholders’ agreements to ensure they are likely to be enforceable.

Author

Back

Avery Law is the business and trading name for a legal practice carried on by Avery Law LLP. Avery Law LLP is a limited liability partnership, registered in England and Wales, with registered number OC374426, with its registered office at 25 Wilton Road, London, SW1V 1LW.

Avery Law LLP is authorised and regulated by the Solicitors Regulation Authority of England and Wales (SRA ID: 568560).

Avery Law LLP is registered with the Information Commissioner’s Office (ICO) with registration number ZA135485.

  • Legal500

Subscribe to our mailing list in order to opt-in to receive our publications, deal insights or event invitations.
Stacks Image p22492_n233

© Avery Law LLP 2020 - All rights reserved.