Creditors Voluntary Liquidation and restrictive covenants

DollyDee_2

Don't know if anyone can help with this one.

If a company is being/has been liquidated, are the restrictive covenants in an ex-employee's contract null and void?

Thank you.

D

pmduk

I'd imagine so, the employer no longer exists so are unable to enforce any rights.

RichardMiller

In my opinion, when a company is going to be liquidate by the court order or by any other reasons, then the company has to sale his shares in less rates and thus in this situation the company has to terminate their employees. And thus the company has no longer authority to enforce his/her employee.

Bantex_2

If the company is sold on the covenants may be enforceable by the new owners.

patman99

If a company closes down for any reason then the covenants become unenforceable.

One case local to me was that of Spottiswoode Ballantyne, a print company. The Directors decided to liquidate the company and cease trading.
During this process, the staff were all made redundant and paid PILON with the improviso that they would have to pay back all PILON if they got jobs in the print industry within 12 weeks of leaving.

The company let the staff go on the Friday and liquidated it's assets on the Monday. One week passed by and one of the staff made redundant got a job within the print industry, so the directors of the now former company decided to sue the former employee for the return of the 12 weeks money as per the agreement he had signed.
The Judge told the Directors that the entity that was S/B no longer existed and so it could not lay claim to any monies or enforce any terms set-out as part of the redundancy process.

DollyDee_2

Thanks for the replies - only just seen the more recent ones.

We checked with the Liquidator, in theory he could enforce the covenants as he is now in charge of the company, however, he stated he would not be interested in doing so. Nothing the former directors/owners could do.

He was looking at getting the most for the creditors (and his fee).

Thanks - Dolly