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Can a non-compete clause be enforced if the business closed down?
My husband worked for a candle manufacturing company. He signed a non-compete clause. The company shut its doors on October 31. The former owners now say they have three months to let the name go dormant from the current owners, then they plan to purchase the name back and thus my husband cannot compete with them.
Can they do this? The business was shut down and all employees let go, all the equipment was sold off. Can my husband now start his own candle-making business without fear of a lawsuit? Also, if he cannot, what about me as his spouse--I did not sign any non-compete agreement.
Asked by postalpaish
Posted: Monday, December 22, 2008 | Found in Legal Issues
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Generally, if a business has closed its doors, there's no one to enforce the provision...so you're free to move forward with your activities. However, if the non-compete agreement made the terms binding on "successors and assigns" -- and your query does mention "current owners" -- this means that the terms CAN be enforced. Because non-compete agreements are usually interpreted according to state law, and the precise wording of the clause is key, you would be wise to speak to an employment attorney in your area who can review the actual document and give you clearer guidance.
Nina L. Kaufman is an award-winning business attorney, author and speaker. For more than 15 years, she has successfully navigated thousands of small businesses through the legal hurdles they face in starting and running their companies. Under her AskTheBusinessLawyer.com brand, she reaches thousands of entrepreneurs and small business owners with her legal services, professional speaking, information products, and LexAppeal weekly ezine.
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