Unfair misappropriation of customers by a partner

Unfair misappropriation of customers by a partner or shareholder of the company

Business freedom

In principle, the partner or shareholder is not bound by any legal non-competition obligation.

Their position does not make them active players in the company. Unlike the managing director, they have no direct link with the company’s customers or business partners.

The Commercial Chamber of the Court of Cassation has established the principle that :

” Unless otherwise stipulated, the partner of a limited liability company is not, in that capacity, required to refrain from carrying on an activity that competes with that of the company and must only refrain from acts of unfair competition ” (Cass. com. 3 March 2015, 13-25.237).

This solution can also be applied to other types of limited or unlimited liability companies.

In principle, a partner or shareholder is therefore free to undertake and create a business that competes with the one in which he or she is a partner.

However, the only limit is the freedom of trade and industry, which prohibits any shareholder or partner from engaging in acts of unfair competition against the company in which he holds shares.

Reacting to unfair practices

If a partner commits acts of unfair competition, it is possible to hold him liable on the basis of article 1240 of the Civil Code.

A partner who diverts the clientele in which he has an interest by using unfair practices is undoubtedly committing a fault (please see our article on this subject by clicking here).

Once the partner’s fault has been proven, it is essential to quantify the loss suffered by the company as a result of the displacement of its customers and to determine the causal link.

Our lawyers will be at your side to put in place a strategy that will enable you to act quickly and avoid any risk of your business being paralysed.

Organising relations between shareholders

Before setting up a company, our lawyers will advise you on how to organise relations between shareholders and their relationship with the company, using appropriate legal tools:

• a non-competition clause in your company’s articles of association or extra-statutory deeds ;
• an exclusion clause in the event of a competing activity.

Unfair misappropriation of customers by a director

The situation is different if the partner or shareholder responsible for the acts of unfair competition holds a managerial position within the company.

The director’s duty of loyalty

Unlike an ordinary partner or shareholder, a managing director has a different relationship with the company. They must always act in the company’s best interests.

Case law has established the principle that a company director has a duty of loyalty to the company. As such, they must refrain from any disloyal behaviour.

For example, the director of your company cannot set up a competing company and then divert your customers, in particular by using your customer database. This constitutes unfair competition!

Managers are bound by a non-competition obligation towards the company during and after their term of office.

The expertise developed by the firm’s lawyers has strengthened their vigilance with regard to all the facts constituting acts of unfair competition, in particular with regard to the misappropriation of customers.

It is interesting, for example, to determine precisely whether your resigning former director set up a competing business and began operating it during his notice period.

Your director is bound by a bond of trust with your company: he or she cannot act against the company’s interests and therefore carry on a competing activity and be the instigator of unfair competition practices.

Possible actions

First and foremost, you should initiate an amicable negotiation phase to put an end to the problem.

Don’t forget that a shareholder or managing partner is a major economic player and the driving force behind the company’s activity.

Setting up confidential negotiations will enable you toput an end to acts of unfair competition quickly and give you the opportunity todiscreetly remove the perpetrators of the criminal actsfrom the company’scapital.

The confidentiality of such a procedure has the advantage of preserving your company’s image in the eyes of its customers and business partners.

In the absence of an agreement, it is always possible to hold the director liable before the competent courts when he commits acts of unfair competition such as misappropriation of customers.

Such action may be brought directly by the company’s co-managers or by the partners through the ut singuli action.

Contractually preventing such risks

You can take precautions against such situations before they arise, so that you can quickly dismiss your director if he sets up a competing company and diverts your customers.

Our lawyers will suggest solutions tailored to your company’s operations to avoid any risk of disruption, in particular by including a non-competition clause in your executive’s mandate to limit the risk of customer diversion.

As you will have realised, the GOLDWIN team of lawyers has developed a three-phase strategy to deal with this type of situation: