Legal Question in Business Law in Massachusetts
Non-compete covenant
I'm incorporated in Massachusetts
I own a franchise assigned to me as president of an s-corp., not personally.
I am considering chapter 7 bankruptcy.
If the debt is discharged does the bankruptcy release me from the non-compete covenant?
I was told casually by an attorney that the bankruptcy releases me from all covenants but the clause states �upon termination or expiration of the agreement for any reason�� He said basically that once the debt is discharger I�m free to do what I please.
The business isn't worth anything but I know the court has a right to sell it. If they don't does the agreement cease to be active? I want to be done with it and move onto the next endeavor, which would be offering the same services on my own.
The franchise offers websites based on proprietary code. I would be offering non-proprietary websites and selling them in a different manner at a lower price, if this is relevant. What I�m saying is I will certainly not be using any trade secrets or operating systems of the franchisor.
Thanks.
2 Answers from Attorneys
Re: Non-compete covenant
Assuming that you have provided your bankruptcy attorney with all relevant documents, he or she should be able to advise you.
It would be surprising to me if the franchisor had not required you individually to sign a noncompete. Beyond that, there may be other principles of law which apply, regardless of the agreement. Whether they fit the facts of your situation would likely depend upon additional information, which you probably should not share on a public forum anyway. If you are trying to avoid the possibility of being sued and or enjoined in the future, it would be worthwhile to speak directly with an attorney.
Re: Non-compete covenant
You need to discuss this with your bankruptcy attorney. It may eliminate the non-compete but not the use of proprietary information in the future. Without actually seeing the agreement or understanding the business it is not possible to give you sufficient guidance. Your bankruptcy attorney should be able to answer the question for you.
You should in this case use a bankruptcy attorney especially given this concern.
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