Validity of post-acquisition restrictive covenants
In the recent case of Cavendish Square Holdings BV and another v BV Makdessi (2012) the court held that restrictive covenants which had the effect of lasting eight-and-a-half years following completion of a share purchase agreement were not an unreasonable restraint of trade and assessed the validity of penalty clauses by reference to the commercial justification test.
The target company (Team Y&R Holdings Hong Kong Ltd) was a large advertising and marketing communications group in the Middle East. The sellers were two individuals (‘M’ and ‘G’), leading business personalities who had built strong personal relationships with their clients. The Claimant (‘Cavendish’) owned 12.6% of the company and in 2008 agreed to purchase a further 47.4% of the shares. The share purchase agreement (‘SPA’) provided for payment of initial consideration and two tranches of deferred consideration, which would not be paid under certain circumstances.
In 2010 Cavendish discovered that M had acted in breach of his duties to the company as a director and in breach of his obligations under the restrictive covenants of the SPA by continuing to be involved and interested in a competitor company…
If you are registered and logged in to the site, click on the link below to read the rest of the Goodman Derrick briefing. If not, please register or sign in with your details below.
Click on the link above to download this briefing from Goodman Derrick.
Sign in or Register to continue reading this article
It's quick, easy and free!
It takes just 5 minutes to register. Answer a few simple questions and once completed you’ll have instant access.Register now
Why register to The Lawyer
In-depth, expert analysis into the stories behind the headlines from our leading team of journalists.
Identify the major players and business opportunities within a particular region through our series of free, special reports.
Receive your pick of The Lawyer's daily and weekly email newsletters, tailored by practice area, region and job function.
More relevant to you
To continue providing the best analysis, insight and news across the legal market we are collecting some information about who you are, what you do and where you work to improve The Lawyer and make it more relevant to you.
News from Goodman Derrick
Briefings from Goodman Derrick
There are reportedly 1,500 children born to UK parents in overseas jurisdictions each year.
Goodman Derrick looks back at the Conservative Party’s manifesto pledges to consider the possible impact on HR professionals in the hotel and leisure sector.
Analysis from The Lawyer
Active financial management is vital, but with firms looking more closely at the process of debt and fee collection, the personal touch still counts
The lure of the law can kick in at any stage of life. We speak to four individuals who have made a radical switch to a legal career