Company law revision question and answer

Angela is employed as a managing director of Eclipse Ltd. The main object of Eclipse
Ltd. is to retail hair products. Angela‟s contract of employment contains a clause which states that in the event of her leaving the employment of Eclipse Ltd, she would not solicit Eclipse Ltd‟s customers for a period of three years.

Angela has resigned from her employment and together with Ellina formed another company Angellina Ltd. whose main objective is to sell hair products.

Angela has given Marie, a salesperson in Angellina Company a list of customers of Eclipse Ltd. to immediately start soliciting the customers for Angellina Company Ltd.

Eclipse Ltd. has learnt of these facts and intends to sue Angela, Ellina and Angellina Company Ltd.

Advise Eclipse Ltd.

This problem is based on lifting of the veil of incorporation courts of law to prevent a person from using a company to evade an existing legal obligation.

 It is evident that Angela entered into a contract in restraint of trade not to solicit the customers of Eclipse Ltd within 3 years of leaving employment.
 By forming a company which is soliciting the customers Angela is in breach of her contractual obligations and Eclipse Ltd has an action against her and Angellina Co. Ltd.
 My advise to Eclipse Ltd is to institute civil proceedings against Angela and Angellina Co. Ltd for an injuction to restrain them from soliciting its customers. The fact that Angellina Co. Ltd was not privy to the original contract not withstanding since Angela is using the company to evade an existing legal obligation.
 My advise is based on the decision in Gilford Motor Co. Ltd V. Horne and Another whose facts were substantially similar to those of the instant case.

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