Non-compete Dispute Involving Shareholders of a Fujian Trading Company

Case Summary

Plaintiff Fujian [Company Name] Trading Co., Ltd. is engaged in the import and export of apparel. Defendant Chen is a shareholder, director, and Deputy General Manager of the company, holding 35% equity, and oversees procurement and sales operations. Between 2023 and 2024, Chen exploited his position as a director and Deputy General Manager to unlawfully establish a competing apparel trading company. He conducted business identical to the Plaintiff's, diverting its customers and suppliers, causing total economic losses of 260 RMB to the Plaintiff. After discovering this, the Plaintiff repeatedly demanded that Chen cease the competitive activities and compensate for the damages, but Chen refused. The Plaintiff has therefore filed a lawsuit seeking to hold Chen liable for breach of contract and to award compensation of 260 RMB for economic losses.

Key Dispute

1.Did the defendant Chen's conduct violate the non-compete obligation?

2.Did Chen's breach of non-compete obligations cause economic losses to the company?

3.Should Chen bear responsibility for compensating the company's losses?

Case Strategy

1.Fixed company business registration information, shareholder and director identification for Chen, the company's articles of incorporation, business registration details for the new company established by Chen, business contracts of the new company, evidence of customer resources, supplier resources, corporate financial audit reports, loss data, records of communications between both parties, and other core evidence.

2.The evidence demonstrates that the Company Law and the company's articles of association explicitly prohibit directors and senior officers from engaging in, or operating for others, any business that competes with the company they serve. As a director and Deputy General Manager, Chen is subject to this statutory non-compete obligation.

3.Chen established a new company without authorization and engaged in clothing import/export business identical to the plaintiff's, utilizing his position at the plaintiff's company to poach its customers and suppliers. This constitutes a breach of his statutory non-compete obligation.

4.Evidence proves that Chen's breach of non-compete obligations directly caused the plaintiff company financial losses totaling 260 million yuan. A direct causal relationship exists, and Chen is liable to compensate the company for these losses.

Processing Result

The court ruled that Defendant Chen must, within ten days of the judgment taking effect, cease operating clothing import and export businesses similar to those of Plaintiff Fujian Certain Trading Co., Ltd. Defendant Chen shall compensate Plaintiff for economic losses amounting to 260 ten thousand yuan. Defendant Chen shall bear all litigation costs, audit fees, and preservation fees incurred in this case.

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