By Calum Covell on Small Business – Advice and Ideas for UK Small Businesses and SMEs
Leaving your job and setting a competing business in direct competition to your previous employer is one of the most high-risk areas for any entrepreneur.
Those who get it wrong can find themselves hit by legal action which can be a disastrous prospect for any new business.
I want to cut ties with my employer and set up a rival business. Can my employer stop me doing this?
Before you do anything, check your employment contract. These could have explicit and implied obligations that apply both during and after your relationship with your previous employer. In most cases, provided that you are not a director, LLP member or partner with fiduciary duties you can generally take “preparatory steps” towards setting up a competitor business without being in breach of your obligations.
However, this will be dependent on what your obligations are stated to be. Be mindful too that they may not be found solely in your employment contract. They may be in a variety of places, including service agreements, shareholders’ agreements, membership or partnership agreements and long-term incentive plans, bonus, or other remuneration schemes.
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