Join our team. Are you ready to change the game? Find out more →

Restrictive Covenants Share Purchase Agreement

The case raises the question of whether the agreement only protects intellectual property rights as they were used by the company at the time of the agreement or whether it also covered the use of such rights as they have developed since then. Was the agreement particularly effective in protecting the brand from an extension to a wider lifestyle brand, rather than just clothing? In the end, the decision turned, as always, to the exact drafting of the agreement and the court found that the purchaser had indeed acquired the global rights to Karen Millen`s name. Ms. Millen was not allowed to use Karen Millen`s name in the household goods store and was unsuccessful in stating that she could also market a clothing brand alone under the name “Karen”. If there is a delay between the signing of the sales contract and the requirements of the transaction, the sales contract contains certain pre-conclude agreements. Most of these are made by the seller for the benefit of the buyer and are generally intended to assure the buyer that there will be no surprises during the transition period or at the conclusion. The buyer can also give alliances to the seller before closing. These are generally limited to the fact that the buyer agrees to obtain all applicable permissions and approvals from third parties and possibly to secure financing for the purchase price. The Court of Appeal found that restrictive agreements could be applied despite the potential for permanent enforcement. For the Court of Appeal`s decision on the question of duration, it was important that the company`s statutes contain mandatory delegation provisions that would apply to the termination of its employment by salaried shareholders and that they set a tight timetable for the compulsory transfer of shares. Any salaried shareholder who is no longer employed would probably cease to be a shareholder shortly thereafter, and this would have been understood by the parties at the time of the negotiation of the shareholder contract. The 12-month period should therefore have started shortly after the end of the employment of a salaried shareholder. The Court found that it would not declare the restrictions unenforceable because of the “relatively unlikely possibility” of a significant delay in the transfer of shares or the “very unlikely possibility” of permanent confinement of a salaried shareholder, even though, in this case, the shareholder was exposed to a delay in the sale of his shares and remained a shareholder.

At closing, GF received the initial purchase price of $35,000 under the SPA. GF did not receive the deferred consideration in October 2015, rushing that LH and CH were already employed by GF and that GF had breached BSG Clause 7.1.2 by employing LH and CH. Rush therefore did not pay the balance of $15,000. GF acknowledged that Rush was entitled to withhold deferred consideration if LH and CH were employed in violation of item 7.1.2. However, on behalf of GF, it was argued that it was not her, but her business, who was the employer. In Guest Services Worldwide Ltd/Shelmerdine [2020] EWCA Civ 85, the Court of Appeal considered a shareholders` pact containing clauses prohibiting employee shareholders from competing with the company and recruiting customers, employees and suppliers both during their employment and for a period of 12 months after they were no longer shareholders.

We take processes apart, rethink, rebuild, and deliver them back working smarter than ever before.