UK Ruling Shows That Clarity Is Key In Restrictive Covenants

Law360 (March 25, 2020, 1:01 PM EDT) -- In the case of Guest Services Worldwide Limited v. David Shelmerdine,[1] the U.K. Court of Appeal considered whether noncompete restrictive covenants in a shareholders’ agreement applying to employee shareholders bound a shareholder, Shelmerdine, after he ceased providing consultancy services to the company, and whether the restrictions were an unreasonable restraint of trade and therefore unenforceable.

When is a restrictive covenant an unreasonable restraint of trade?

A noncompete covenant is a type of restraint of trade. Broadly speaking, the English court will not allow someone to enforce a restraint of trade unless it protects a valid interest of the party that wishes...

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