In the case of a company takeover, it is not unusual for the selling party to bind himself to a non-competition clause. In other words: the selling party may not engage in any competitive activities, obviously to protect the company that has been sold. But even if such a clause is not included in the acquisition contract, the seller does not have a free pass!
Earlier this year, the North Holland District Court ruled on the dispute between the old and the new owner of Design92, a company in sublimation and printing articles. In early 2020, A (74 years old) sold this one-man business to B for a purchase price of €105,000, but he continued to work for the company. However, A leaves the company after a disagreement arises between him and the management. After his departure, A set up a new website and sent an e-mail to an unknown number of people, in which he announced that he would be carrying out sublimation work again (independently) for his regular clientele. A also announces that he has a new website.
Design92 disagreed and initiated summary proceedings. The company argued that there was unlawful competition by former owner A. The preliminary relief judge agreed with the company: even though the sale contract did not contain a non-competition or non-solicitation clause, that does not mean that A could just start a similar business in the immediate vicinity with the same business activities. After all, engaging in competitive activities is not compatible with the purport of the takeover contract.
In the words of the court: "Such an agreement, whereby one person transfers a commercial undertaking to another, generally precludes conduct which would amount to the transferor putting his legal successor in competition with him by continuing to carry out, in the immediate vicinity of the transferred undertaking, the work which he was already carrying out for the undertaking before the transfer. The local reputation of the transferor will also be decisive in determining whether the conduct falls within the limits referred to here.”
The judge imposed a one-year ban on A performing the same or similar work. His new website must also be taken offline. The ban is limited to existing customers of Design92. You can read the full judgment here.
This judgment emphasises once again the importance of proper contracts in case of a company takeover. Do you have plans to buy or sell a company? Then let the corporate lawyers at SPEE advocaten & mediation assist you.