Court Embargo on Revealing Confidential Information

Directors of companies are entitled to any information they reasonably request about the company of which they are a director. It is therefore normal for a director to possess a great deal of confidential information about the company. Directors are also bound to high standards of conduct with regard to their behaviour towards their company.

In a recent case, the High Court ruled that an ex-director’s obligations were sufficiently strong as regards the company of which he had formerly been a director to prevent him from revealing information about his former company to his new employer, in spite of the fact that it is notoriously difficult to enforce restraint of competition clauses in employee contracts.

The ex-director had been on the verge of revealing confidential information about one of his former company’s products after he was ordered by the court to sell his shares to his former co-director when a court action was brought against him for taking actions which were prejudicial to the company.

The two men argued about the price to be paid for the shares and, when agreement could not be reached, the ex-director decided to help his new employer in an action against his former firm over a patent dispute.

The High Court granted his former employer a ‘perpetual injunction’, banning the ex-director from disclosing specified information regarding the product.