Commentary

121.3 Application to shareholders’ agreements

BUSINESSES vol 4(2) start-up, sale and purchase
| Commentary

121.3 Application to shareholders’ agreements

| Commentary

121.3 Application to shareholders’ agreements

In the case of a private limited company, it seems quite clear that a shareholder in that business may have a legitimate interest in preventing a retiring shareholder from competing with the company business or in soliciting customers or company employees. Indeed, where all the shareholders are also directors and involved in the day-to-day running of the business, the situation is very like that of a partnership. Consequently, provisions contained in a shareholders’ agreement, restraining the trading activities of a retiring partner, should be enforceable under the Deacons v Bridge rule above1, provided that those

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