Law · Company Law
Quentin was a senior design consultant at Bee Ltd. He entered into a non-compete covenant with Bee Ltd that upon termination of employment, he would not compete or solicit its customers. After leaving, Quentin incorporated Cee Ltd, of which he was the sole director and shareholder, and immediately began competing and soliciting Bee Ltd's customers. Which of the following statements is correct?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Quentin is not in breach because Cee Ltd is a separate legal entity distinct from him.
- 2Since Cee Ltd was formed as a mere sham or cloak to evade the non-compete covenant, the court will lift the corporate veil and enforce the injunction.✓
- 3Cee Ltd will be automatically bound by the covenant because a company is always strictly liable for all actions of its shareholders.
- 4The non-compete agreement has no legal validity as it restraint of trade after employment ceases.
Correct answer
Since Cee Ltd was formed as a mere sham or cloak to evade the non-compete covenant, the court will lift the corporate veil and enforce the injunction.
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