Q: What happens if a shareholder with a noncompete agreement forces to open a direct competition right next to us?
We found out that one of the shareholders was secretly planning to leave the company and start a direct competition literally two blocks away from us. There is a shareholder agreement that everyone signed that has a noncompete clause which prohibits shareholders to be involved in a competition for three years after leaving/selling the interest in the company.
So what happens if she ignores the agreement and forces to open up a competition. Can the court stop her from opening up the store?
A: Yes, one always has a right to litigate a valid issue. The question did not state whether any dispute concerning the contract was to be arbitrated instead of litigated. For purposes of my answer, I presumed there was no such provision in the agreement. The issues that a court will look to are whether the duration of the non-compete is reasonable and whether the restrictive area agreed to is reasonable.
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