Handcuff clauses and change of company

[northernladuk]

Am I right in thinking a handcuff clause exists in a contract between your client and your LTD therefore if you close the LTD and re-open with a new one the handcuff no longer applies or is there some complication that you are an employee of your LTD as well as a director?

Also what would happen if you went to the new contract under a trading name. Would the handcuff still exist as the trading name is just a name relating back to the original LTD that entered in to the agreement?

[LisaContractorUmbrella]

Am I right in thinking a handcuff clause exists in a contract between your client and your LTD therefore if you close the LTD and re-open with a new one the handcuff no longer applies or is there some complication that you are an employee of your LTD as well as a director?

Also what would happen if you went to the new contract under a trading name. Would the handcuff still exist as the trading name is just a name relating back to the original LTD that entered in to the agreement?

It would all depend on how the contract was worded - if it referred to a named individual as a representative of the Ltd Co then it would, in theory still apply

[northernladuk]

It would all depend on how the contract was worded - if it referred to a named individual as a representative of the Ltd Co then it would, in theory still apply

Agreed but I had assumed we all make every possible effort not to put a named individual in contracts. Lets go on the presumption it is a contract with Ltd as 'the consultant'.

[oracleslave]

I think you'd be on very thin ice although it is possible to get away with. I was unsuccessfully sued by an agent when attempting something fairly similar.

Lots of legal reference to Piercing the corporate veil - Wikipedia, the free encyclopedia during my case and I have a feeling it might apply to what you suggest above.

[LisaContractorUmbrella]

Agreed but I had assumed we all make every possible effort not to put a named individual in contracts. Lets go on the presumption it is a contract with Ltd as 'the consultant'.

Then I guess it would come down to interpretation of the contract by the courts if the agency decided to sue. They could put forward a case that the only reason the company phoenixed was to avoid the handcuff clause in which case it would then be up to the lawyers to fight out whether or not a single person Ltd company would become either the personnel of the Ltd Co or the legal embodiment of the ltd company - in either case the clause could be applicable

[Wanderer]

Am I right in thinking a handcuff clause exists in a contract between your client and your LTD therefore if you close the LTD and re-open with a new one the handcuff no longer applies or is there some complication that you are an employee of your LTD as well as a director?

Depends how the clause is worded. I've seen some of them which seek to put restrictions on the consultants supplied by the company rather than just the company itself.

The link from oracleslave is a good one, there is an example in Gilford Motor Co Ltd v Horne which may be relevant here.

Of course, the enforcement point is often the client rather than the contractor. While the contractor may be willing to stand up to the agency, the client may be risk averse and refuse to engage the contractor other than through the agency.

Also what would happen if you went to the new contract under a trading name. Would the handcuff still exist as the trading name is just a name relating back to the original LTD that entered in to the agreement?

My understanding is that the trading name doesn't alter the underlying entity, it's the ltd company which is the legal entity that does the business deal. eg, DSG Retail Limited trading as Currys.

Ahhh, and I just have to ask: did you opt out of the agency regulations?

If you didn't then it probably wouldn't cost all that much to pay the agency off to remove the 8/14 week restrictive covenant or in the worst case it's going to limit how much they could claim off your company should they win a judgement against you LTD and/or the client in court...