Founder non-competes: protect the startup without banning an entire industry

A founder leaves the operating team and, three months later, starts advising another business in the same sector. The remaining founders say this breaches the non-compete. The departing founder says the other company solves a different problem.

Both point to a clause prohibiting “any activity competing with the company’s current or future business”. It does not identify the protected product, the restricted role or how long the restriction lasts.

A useful founder non-compete protects a defined business interest without making every future job in the industry a dispute. Start with the product and the conduct that could harm it. Then check enforceability under the applicable law.

The commercial questions below arise across markets. National non-compete rules differ substantially. The legal implementation section discusses Polish law and should not be used to predict enforceability in the US, UK, Germany or another jurisdiction.

What you will learn

In brief

• Define the protected product and prohibited conduct before choosing duration or territory.
• Assess confidentiality, code ownership and solicitation alongside the non-compete.
• A shareholder, board member and employee can be subject to different rules.

Define the business you are protecting

Write down the product, customers and concrete opportunities at risk. A route-planning SaaS for transport operators does not necessarily compete with every logistics product. A broad industry classification in a corporate register is a poor substitute for describing actual competitive activity.

Consider both today’s product and sufficiently concrete development plans. An approved roadmap is different from every idea the founders might pursue in the future. Decide which plans matter, how they are identified and what happens if the company abandons them.

Then define prohibited conduct: building a substitute product, leading its development, making competing sales, advising on the protected technology or controlling a competitor. These roles can create different risks. Do not treat a passive investment and operational leadership as identical without considering why each is restricted.

The founders agreement should explain that boundary before a founder leaves, rather than after the team discovers the next project.

Departure is not one legal event

A person may stop working in the business while remaining a shareholder. They may resign from the board but remain employed. They may leave employment while retaining a services agreement.

Map those relationships and the documents governing each one. A founders agreement, investment agreement, employment contract, services contract and NDA can contain overlapping obligations with different start dates or exceptions.

Separate restrictions during involvement from restrictions after it ends. An obligation attached to a corporate office does not automatically resolve what happens after resignation. A contractual restriction linked to share ownership might continue even when the founder has no operational role.

Avoid treating “good leaver” or “bad leaver” as a definition of competition. Those are contractual classifications, often connected to equity outcomes. If a restriction changes according to the departure circumstances, explain the change and coordinate it with vesting and leaver arrangements.

Would a narrower obligation solve the problem?

If the concern is confidential pricing, secure the information and define its permitted use. If it is code, establish who owns the startup’s software. If it is targeted recruitment or taking active customer opportunities, consider a carefully scoped non-solicitation obligation.

For customers, distinguish accounts the founder served, genuine prospects developed during a defined period, pre-existing personal relationships and unsolicited inbound enquiries. Prohibiting contact with every company ever entered in the CRM can be difficult to explain commercially.

For the team, distinguish targeted attempts to move named colleagues from a public job advertisement or an unsolicited application. The enforceability and appropriate scope of any restriction still require legal assessment. Calling it non-solicitation does not make an unlimited restriction reasonable.

Under Polish law, Articles 11 and 12 of the Unfair Competition Act address trade secrets and specified conduct inducing contractual non-performance or termination. They should not be read as a blanket prohibition on hiring former colleagues or serving former customers. Proper confidentiality protection also requires practical measures to keep relevant information secret.

Match duration and territory to the risk

Ask how long the departing founder’s knowledge could materially help a competing product. Current SaaS pricing may lose value faster than a long-cycle technology plan. Use that analysis when negotiating the period, rather than copy a number from another agreement.

Territory should reflect the business actually protected. A digital product can have cross-border reach, but that does not itself justify preventing every activity worldwide. Consider where customers are served and where there is a concrete plan to compete.

Define release and consent procedures. Who may approve an adjacent project? What information must the founder supply? When should the company respond? What happens if the protected product is discontinued? A workable process reduces uncertainty without turning silence into unrestricted permission accidentally.

No period or territory is universally enforceable. The relevant national rules and the founder’s actual relationships remain decisive.

Polish implementation: shareholder, board member or employee?

Shareholder only. Owning shares in a Polish sp. z o.o. or simple joint-stock company, a prosta spółka akcyjna or PSA, does not by itself create a general statutory non-compete. Contractual duties and the actual role must be checked separately.

Corporate office. The Commercial Companies Code contains competitive-activity restrictions for management board members: Article 211 for a sp. z o.o., Article 380 for a joint-stock company, and Article 300⁵⁵ for a PSA’s board members or directors. Consent rules differ; the PSA articles can provide otherwise. These restrictions concern the office, not an automatic lifelong ban after departure.

The statutory rules also cover certain participation in competing companies, including specified holdings of at least 10% or appointment rights, with voting thresholds relevant to the PSA. A smaller holding is not a blanket safe harbour for actively engaging in competing business. Read the actual rule and any contractual restrictions together.

Civil agreement. Article 353¹ of the Civil Code allows contractual freedom within limits including the nature of the relationship, statute and principles of social coexistence. It does not give founder agreements a universal safe duration or territory. Review the obligation’s scope, commercial justification and the specific circumstances.

Polish employment restrictions have their own rules

A founder who is also an employee needs a separate employment analysis. The Labour Code, Articles 101¹ to 101³, regulates non-competes during employment and after it ends.

For a post-employment restriction, the framework concerns employees with access to particularly important information whose disclosure could harm the employer. The agreement specifies duration and compensation. The statutory minimum is 25% of the remuneration received before termination over a period corresponding to the restriction’s duration. The restriction ceases early if its justifying reasons disappear or the employer fails to pay the compensation. The prescribed written form is required for validity.

That 25% rule is not automatically the compensation rule for every civil founders agreement. Equally, placing an employee’s restriction in a document called a shareholders agreement should not be assumed to displace employment protection. Assess the overlapping roles and documents.

Define a breach before setting the penalty

A clause demands PLN 500,000 “for each breach”. Does a month of consulting count as one breach or 30? Is contacting a customer one breach, or is every message another? What if the activity continues?

Agree the unit, continuing-breach treatment and any aggregate cap. Decide how notices, correction and enforcement fit the commercial risk. Do not postpone those choices until calculating a claim.

For Polish civil obligations, Articles 483 and 484 of the Civil Code govern contractual penalties for non-monetary duties. Damages exceeding the penalty require the appropriate contractual reservation. The debtor may seek reduction in the statutory circumstances, including a grossly excessive penalty. A dramatic number cannot make an undefined prohibited activity clear.

Model case: two products in logistics

A hypothetical startup supplies route-planning SaaS. Its product founder leaves the team but keeps shares. They are neither an employee nor a board member. They later advise a warehouse-management business whose customers partly overlap with the startup’s, but whose product does not plan routes. They do not use the startup’s code, documentation or secrets.

A ban on “all current and future logistics activity” gives little help. Review the actual products, the founder’s work, any targeted customer solicitation and the information used. Customer overlap alone does not describe the whole competitive relationship.

A better agreement would identify route-planning activity, protect concrete confidential information and define any solicitation restrictions. It could provide a consent process for adjacent projects and an agreed duration after departure, subject to enforceability review.

The same project could look different if the former founder develops a competing routing module or uses the startup’s non-public customer pricing. The point is to assess the conduct and protected interest, rather than decide by the sector label alone.

Before signing or approving a founder’s next project

Describe the protected product, competing functions, duration, territory and exceptions. Map the founder’s shareholding, office, employment and services relationships. Check confidentiality, code ownership, solicitation and equity arrangements alongside the proposed restriction.

Where an adjacent activity can be approved safely, record its permitted scope so that both sides understand the boundary. For review of Polish founder documents, see our startup legal services or contact us.

Sources and further reading

• Kodeks spółek handlowych, Commercial Companies Code, Articles 211, 300⁵⁵ and 380. Official text in Polish.
• Kodeks cywilny, Civil Code, Articles 353¹, 483 and 484. Official text in Polish.
• Kodeks pracy, Labour Code, Articles 101¹ to 101³. Official updated text in Polish.
• Ustawa o zwalczaniu nieuczciwej konkurencji, Unfair Competition Act, Articles 11 and 12. Official text in Polish.