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company law : can a director work as an employee for a rival?

Discussion in 'Company law' started by taotau77, Apr 15, 2010.

  1. taotau77 New law student

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    Is it possible of a director to work as an employee for a rival company? Does he breach any of his duties as a director? Is there any conflict of interest in this case?

    Somebody helps me please.
    Thank you in advance.
    taotau77, Apr 15, 2010
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  2. mike Law student

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    can a director work as an employee for a rival company?

    I guess this depends on the work contract, company policies and or the country you live in.
    But the thing to look at I think is

    NONCOMPETITION AGREEMENT.

    In the noncompetition clause the employee agrees that he or she will not become employed by a rival company or any company engaged in a similar type of business, and the employee will not set up a company that will compete with the employer's business or solicit the employer's customers. Usually the noncompetition clause is limited to a particular geographic area.

    EXCLUSIVE EMPLOYMENT.

    In this provision, the employee promises that as long as he or she works for the company the employee will not work for anyone else in the same or similar type of business. It may also extend to a promise not to be a shareholder or director in a similar business, or even to provide services voluntarily to a similar or competitor business.

    CONFIDENTIALITY AGREEMENT.

    An employee confidentiality agreement is a contract or part of a contract in which the employee promises never to share any information about the details of how the employer's business is conducted, or the employer's secret processes, plans, formulas, data, or machinery used, such as the price the company has charged for its products. Usually a confidentiality agreement lasts even after the employee no longer works for the employer.
    mike, Apr 15, 2010
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  3. Molineux Super Moderator

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    can a director work as an employee for a rival company?

    Director can of course work for any other companies as a director or as an employee provided he discloses his intent and observes the fiduciary duties
    1 There is a duty not to make secret profits
    2. There is a duty to promote the success of the company
    See CA 2006 section s172 and s 175
    It can be strictly applied; 1. unless an independent board has approved it the directors would be in breach and 2. observation of fiduciary duty is not easy as the court will interpret that the directors have a duty to prevent conflict of interests and it is immaterial whether the company in question may benefit from it.
    Molineux, Apr 15, 2010
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  4. taotau77 New law student

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    can a director work as an employee for a rival company?

    Thank you very much for your answer. I just want to ask is there any cases related to this problem to support for my answer. Moreover, I'm not sure about the punishment for director who fails to disclose breach of duty by fellow director.
    taotau77, Apr 16, 2010
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  5. Molineux Super Moderator

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    can a director work as an employee for a rival company?

    PUNISHMENT;The director has to account for the profit made or be resposible for any loss to the company. Unlikely to have any criminal liability. Shareholders may ratify the act of a director.

    For cases, it is not just about a pivotal case to be cited, you actually need to develop an argument that involves a number of cases (generally found in any text book), first explaining fiduciary duty then narrow it down to conflict of interests.
    Molineux, Apr 17, 2010
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  6. Camilla New law student

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    can a director work as an employee for a rival company?

    Most of the places I have ever worked have a noncompetition agreement buried in all the paper work you have to fill out upon being hired. As someone else said there would probably be no criminal prosecution but you would very likely lose both jobs.
    Camilla, Apr 19, 2010
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  7. Molineux Super Moderator

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    can a director work as an employee for a rival company?

    but you would very likely lose both jobs. - On what ground?
    Molineux, Apr 19, 2010
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  8. Camilla New law student

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    can a director work as an employee for a rival company?

    I would think most likely both employers would have a non-competition agreement not just one of them. If the director failed to inform both companies that he was working for the other he would be in violation of both of them which would be grounds for dismissal.
    Camilla, Apr 22, 2010
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  9. Molineux Super Moderator

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    can a director work as an employee for a rival company?

    I don't think there is a fiduciary duty of disclosure of employment only a duty not to make secret profits
    Molineux, Apr 24, 2010
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  10. amndacatr New law student

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    can a director work as an employee for a rival company?

    These days most companies have Non-Competition Agreement and in case of an well established companies they also have the Exclusive Employment. And if it is the director, I don't think that the share holders, if any, would allow to have it going this way. On top of that he would have to shell out a huge amount of money if accused of forgery by the company who unknowingly employed the director of their rivals.
    amndacatr, May 6, 2010
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  11. Mark Peter New law student

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    can a director work as an employee for a rival company?

    . It seems like joke
    Mark Peter, Jul 23, 2010
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  12. mike Law student

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    company law : can a director work as an employee for a rival

    What seems like a joke?
    It would be good to maintain a certain standard of posting on LSF at all times. It saves the moderators time in editing posts, removing advertisings etc
    mike, Jul 24, 2010
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