Track Record: Successful defense against non-compete claim in a joint venture

A joint venture, a conflict, and a competing shareholder\n\nImagine this: two shareholders establish an ambitious joint venture for the operation of pharmacogenetic tests. The collaboration begins promisingly, but over time, it becomes irrevocably deadlocked due to diverging visions on business management. One of the shareholders subsequently decides to go their own way and starts a competing business, while formally remaining a shareholder in the joint venture. The other party immediately responds with legal action, demanding that the court impose an injunction on all competing activities.\n\n## The starting point: a shareholder is allowed to compete\n\nIn our legal practice, we often see entrepreneurs mistakenly believing that holding shares automatically implies a ban on competing with the company. According to the well-known principle from the judgment of the Arnhem Court of Appeal ECLI:NL:GHARN:2011:BQ0581, a shareholder is in principle free to develop competing activities. The mere fact that you are a shareholder does not make competition improper or unlawful. This starting point is essential for freedom of contract and the latitude entrepreneurs need to continue pursuing their own business interests.\n\n## When does competing activity become unlawful?\n\nThe freedom to compete is not absolute. In exceptional cases, reasonableness and fairness (Article 2:8 DCC) can lead to a restriction of this freedom. This often occurs in a very private limited company where there is a close, almost family-like collaboration and an enhanced duty of loyalty. Also, when a shareholder actively misuses specific know-how or customer information obtained through the joint venture, the court may rule that this constitutes a tortious act.\n\n## What was the situation in this case?\n\nIn the case we handled ECLI:NL:RBMNE:2026:453, District Court of Midden-Nederland, January 30, 2026, it concerned a joint venture that offered pharmacogenetic tests via primary healthcare. Our client, a co-shareholder who had previously contributed their own lab and diagnostic platform, decided to step down as a director in March 2025 after a conflict with the other shareholders. They subsequently continued offering these tests through their own company. In summary proceedings and in the merits case, the joint venture demanded the total cessation of these activities, relying on Article 2:8 DCC.\n\n## The position of the joint venture: enhanced duty of loyalty\n\nThe joint venture argued that the internal relationships were so close-knit that an enhanced duty of loyalty applied, which prohibited any form of competition. They referred to a draft shareholders' agreement that included a non-compete clause. The core of their legal attack was that our client, through their actions, was acting in violation of social standards of propriety and their duty of loyalty toward the company.\n\n## Our defense and the court's ruling\n\nTogether with my colleague, I successfully argued that a shareholders' agreement had never been concluded: a draft is legally insufficient to enforce a non-compete clause. After all, a draft does not demonstrate a meeting of minds. Regarding the enhanced duty of loyalty, we argued that this only applied as long as the close collaboration actually continued. Due to the dilution of our client's interest and the serious breach of trust, that close collaboration no longer existed. Furthermore, it did not appear in any way that our client was damaging the joint venture's business goodwill through their activities, for example by convincing customers to switch. The court ruled in line with our defense that the collaboration had ended and that no improper use of know-how had occurred. The claims for the cessation of activities were rejected in their entirety.\n\n## What does this mean for you as a shareholder?\n\n- You are in principle allowed to compete with a company in which you are a shareholder; that is not automatically unlawful.\n- Be careful with a very private joint venture characterized by close collaboration: as long as that exists, an enhanced duty of loyalty may restrict you.\n- Never use know-how or customer information from the joint venture for your competing activities.\n- Always document agreements regarding competition in writing in a (shareholders') agreement; a draft without it being clear that the other party consents to the draft is insufficient.\n\n## What can we do for you?\n\nAre you a shareholder involved in a conflict with your partners, or are you being confronted with an unjustified demand to stop your business activities? Mr. Vincent Besters has extensive experience with such disputes. We analyze your position, assess the legal risks, and work with you to determine the best defense strategy.\n\n## Rulings\nThis blog post is based on ECLI:NL:GHARN:2011:BQ0581 and ECLI:NL:RBMNE:2026:453.