"After the horse is stolen"

[TaxmannEA]

I think that the person is SOL, but I thought that I'd ask the wiser heads on the board for advise.

A 2-shareholder corp runs an accounting business. One shareholder dies and the remaining principal and the deceased's family sell the stock to a third party owner. Third party owner sells to another accounting firm. The remaining original owner retires after several years under the new ownership and proceeds to take about 40% of the firm's business with them. No non-compete agreement was signed in the original sale.

Does the current owner company have any recourse that anyone knows of? My first thought is that without a covnent not to compete, there is little that can be done. I'm not looking for a legal opinion, just general guidance.

[OldJack]

>>and proceeds to take about 40% of the firm's business with them.<<

There may be a violation of the individual's corporate responsibility and theft of corporate income if that person was an officer of the corporation when he/she contacted clients to go with them. Your client needs to establish facts and talk to an attorney.

[jainen]

>>No non-compete agreement<<

Lack of a non-compete contract just means he is free to practice in the same area. It does not mean he can steal corporate assets such as client lists and backup files. However, because of the personal nature of the service and the clients' right to choose whomever they want, it is difficult to win a legal fight. Often a friendly compromise can be negotiated with the corporation giving up the most.

[kcjenkins]

State laws on corporate officers' fiduciary responsibilities would be where you would start looking. But it is always messy when it involves personal services, so before they go to a lawsuit, they would be much wiser to try to reach some financial compromise. Quite frankly, without some specific contract being violated, the cost of the legal efforts to collect anything would probably outrun the amount collected, if any.