Starting a second similar business - conflict of interest?

Discussion in 'Legal' started by Sockstory, May 21, 2015.

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  1. Sockstory

    Sockstory UKBF Contributor Full Member

    38 3
    Dear kind and generous UKBF members,

    Yet another strange legal question that I could really use some help with.

    So a year or two ago I started a sock company and got an investor on board. The general aim of this company was mostly to make a new brand, but also involved wholesale. Some parts of the biz have done OK, others less so. But then a year passes and i've messaged the investor many times and received no reply.

    I don't necessarily want to close the business down, as it can be developed more later. But I would like to start a new company that sells socks but also a few other products based on a common theme. My concern is - would this be considered a rival business and if the investor comes back from the dead, could i be in trouble? Essentially what started off as wholesale and a brand, i want to make it just a brand, for later, and switch wholesale to the new company. It sounds bad phrased like that, but i'm trying to do something much bigger than what we originally agreed to, and without his response, i don't know how i can realise these plans? Is there anything you can do against an unresponsive investor?

    Any advice would be much appreciated.

    Posted: May 21, 2015 By: Sockstory Member since: Aug 2, 2013
  2. Scalloway

    Scalloway UKBF Legend Free Member

    16,155 3,415
    Do you have a written agreement with your investor?
    Posted: May 21, 2015 By: Scalloway Member since: Jun 6, 2010
  3. moduslegal

    moduslegal UKBF Regular Free Member

    140 39
    Assuming your business is a limited company and you are a director, I think what would make me nervous would be that by removing part of the business of the company and switching it somewhere else you are in breach of various directors duties. (Can't remember the exact one but, duty not to be in conflict with the company, duty to promote the success of the company for the benefit of its members as a whole, duty not to make a secret profit etc). So what you run the risk of is this investor re-appearing, joining the company in a s.994 Companies Act 2006 action and taking you to court (plus potential other actions such as unfair prejudice etc). Admittedly these actions are very expensive to pursue. I suppose ultimately it depends on how much money is involved and what sort of temper your investor has.

    Hope that helps.

    Posted: May 21, 2015 By: moduslegal Member since: Sep 18, 2009
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