Starting a Business

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.
min read
Opinions expressed by Entrepreneur contributors are their own.
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.

More from Entrepreneur

Are paying too much for business insurance? Do you have critical gaps in your coverage? Trust Entrepreneur to help you find out.
Get Your Quote Now

One-on-one online sessions with our experts can help you start a business, grow your business, build your brand, fundraise and more.
Book Your Session

Whether you are launching or growing a business, we have all the business tools you need to take your business to the next level, in one place.
Enroll Now

Latest on Entrepreneur

My Queue

There are no Videos in your queue.

Click on the Add to next to any video to save to your queue.

There are no Articles in your queue.

Click on the Add to next to any article to save to your queue.

There are no Podcasts in your queue.

Click on the Add to next to any podcast episode to save to your queue.

You're not following any authors.

Click the Follow button on any author page to keep up with the latest content from your favorite authors.

It Started As a Joke and Turned Into a Startup That Raised $1 Million in Funding