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RESTRICTIVE COVENANTS: Spot the difference – restrictions in sale and shareholder agreements

28 September 2017  

The courts take a markedly different approach to enforcing covenants in sale-and-purchase and investor agreements compared to those in employment contracts, reports Sam Whitaker

Restrictive covenants in employment contracts are familiar territory for most private-practice and in-house employment lawyers but they may be less familiar with covenants in sale-and-purchase agreements (SPAs) and shareholder or investment agreements. Often, in a transactional context (and particularly in private equity (PE) transactions), it is useful for employment lawyers to have a basic understanding of the legal issues relating to the enforceability of such covenants and how they interrelate with each other. This article looks at the basic enforceability issues with such covenants.

Additional Info

  • Case(s) Referenced:

    British Reinforced Concrete Engineering Co Ltd v Schelff [1921] 2 Ch 563

    Cavendish Square Holdings BV & anor v El Makdessi [2012] EWHC 3582 (Comm)

    Dawnay Day & Co Ltd v de Braconier D’Alphen & ors [1997] IRLR 285

    Dranez Anstalt & ors v Hayek & ors [2002] EWCA Civ 1729

    Kynixa Ltd v Hynes & ors [2008] EWHC 1495 (QB)

    Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535

    One Step (Support) Ltd v Morris-Garner & anor [2014] EWHC 2213 (QB)

    Systems Reliability Holdings plc v Smith [1990] IRLR 377

    TSC Europe (UK) Ltd v Massey [1999] IRLR 22

    Trego v Hunt [1896] AC 7

    Vancouver Malt and Sake Brewing Co Ltd v Vancouver Breweries Ltd [1934] UKPC 9

Last modified on 28 September 2017