Competitive Activity of a Management Board Member

25.05.2026

Roman served as a member of the management board in a cybersecurity company whose primary line of business was data recovery. The company rescued other businesses in critical situations – when their servers fell victim to failures or hacker attacks. These interventions cost a fortune, but the engagements occurred rarely, only in emergencies.

Roman conducted a market analysis and concluded that this was too risky a business model. In his opinion, the future of the industry lay not in “firefighting,” but in prevention – inexpensive, subscription-based data backups. He decided to pursue this idea on his own, without informing the company of his plans. He assumed he had the right to develop his own projects after working hours at his company, especially since he was not bound by any additional non-compete agreement.

However, he decided to keep his new activity low-profile. He acquired a mere few percent of the shares in the newly established company, where his sister-in-law, Matylda, became the president of the management board. Formally, he did not hold any position in it – each month he merely issued invoices for advisory services.

For several months, Roman drew a high salary from his parent company while simultaneously building his second business. Over time, the offering of his new company became attractive enough that it began reaching an increasingly wider range of clients.

The market for emergency rescue services began to dry up rapidly. One of the reasons was precisely the high level of prevention that companies achieved thanks to Roman’s services.

The truth came to light when the management board began cold-calling regular clients with a new offer. In response, some of them indicated that the services offered by Mr. Roman were sufficient for them and they no longer required their support.

The bombshell dropped – the business partners demanded immediate explanations. Roman defended himself, claiming that he only played a marginal advisory role in a company with a different business profile. He argued that the market is spacious and both companies provide completely different services.

The company countered that both firms targeted the same client – a company possessing data and looking for ways to protect it. From an economic perspective, choosing one service diminished the need to purchase the other. Both services constitute broadly understood cybersecurity activities, and Roman – acting for the benefit of the new company – utilized the know-how acquired at his original company. What is more – both companies were expanding their operations into other data protection services.

The company, remaining unconvinced by Roman, dismissed him from the management board and demanded the payment of high damages – in order to offset the losses incurred.

Roman ignored the letter – he only called the president back to inform him that he did not accept any liability. If the company wanted anything from him, it would have to obtain a judgment in Court. He knew that the company faced a difficult task – calculating and proving the exact amount of damage it sustained in connection with Roman’s disloyal conduct.

The company therefore faced a difficult choice – to let it go and move forward, or to attempt to recover the lost funds, taking into account the prolonged nature and complexity of this process.

Did Roman actually not violate the provisions regarding the non-compete obligation? What should the company do? In what way should the company secure itself against such situations in the future?

What Does the Commercial Companies Code Say About the Non-Compete Obligation?

Principles regarding the non-compete obligation in limited liability companies are regulated by Art. 211 of the Commercial Companies Code (CCC). According to this provision, a management board member, among other things, cannot officially sit on the governing bodies of another company, nor engage in competitive business.

From a legal point of view, it does not matter whether Roman formally holds a role or has a specific position in the new company. Even ordinary advising to a competitor, assisting in its development, or sharing a client list is considered an action to the detriment of the company.

How to Determine Whether the Activity Was of a Competitive Nature?

The most important thing is therefore to establish whether Roman’s new company actually threatened the interests of the company. If it turns out that it did, we go one step further. It is necessary to determine the amount of penalties we can demand.

The Commercial Companies Code itself does not contain a definition of the concept of “competitive activity.” However, in similar cases, courts have held that a competitive entity is any company that operates in the same market area and competes for the same clients. It is therefore a very broad concept.

In practice, the key is how both companies look side by side in the market. To check whether they are actually competing with each other, it is enough to compare their offers, reach, and target audience. The entire analysis boils down to a simple question: can the activity of this new company realistically reduce the profits or infringe upon the interests of the parent company?

In our story, Roman actually breached the non-compete obligation. It is essential that the Company in which Roman is a management board member is able to indicate what specific damages it suffered because Roman had a “side business.”

The strongest evidence for the firm would be documents unambiguously confirming that clients who had previously used its services suddenly moved to the competitor created by the former management board member. Such a comparison allows for a mathematical demonstration of the loss and becomes the basis for calculating real damages.

In business, however, it is rarely possible to mathematically prove that this one project lowered the company’s profit by a specific percentage – after all, the financial result is influenced by a multitude of variables. Therefore, it is safest to regulate this in the agreement itself. This allows for avoiding a battle over the valuation of damage and the difficult task of proving that it was precisely the “side business” that caused the drop in profits.

How to Effectively Protect the Company’s Interests in the Future?

What is key?

The introduction of contractual penalties removes the burden of proof from the company. We no longer need to precisely calculate losses or analyze how the management board member’s disloyalty affected profits. A contractual penalty operates automatically – if a breach of rules occurred, damages are due in a pre-determined amount, without the need to indicate specific lost projects.

Effective protection of the company’s interests does not rely on general declarations, but on precise and enforceable contractual provisions. A properly drafted non-compete agreement should, above all, be specific.

The foundation here is a precise definition of competitive activity, which clearly indicates prohibited industries, specific actions, and even a list of entities with which cooperation is banned. Such an approach cuts off all definitional disputes and makes the boundary between permitted action and a violation visible in “black and white.” This deprives a disloyal manager of the most common line of defense based on a subjective interpretation of general provisions.

The key link in this safeguard is contractual penalties. It is they that give the agreement real power, allowing for the imposition of a financial sanction for the mere fact of breaching the prohibition. In such a model, the company does not have to fight exhausting battles over evidence to demonstrate the amount of damage incurred or the connection between a drop in turnover and the actions of a given person – proving the violation of a specific provision is sufficient. Thanks to this, pursuing justice is significantly faster and simpler than in the case of lawsuits under general principles. What is more, the awareness of the existence of unavoidable and severe penalties acts preventively, effectively discouraging “playing both sides.”

Additional Clauses Safeguarding Relationships and Resources

A modern agreement must protect not only markets, but above all, relationships and resources. Non-solicitation clauses are an indispensable element here, which under penalty of financial sanctions prohibit the “poaching” of key clients and employees. The protection is complemented by imposing an obligation on the manager to present the company with every new business concept from its industry and the requirement to obtain written consent for any additional professional activity.

The implementation of such designed solutions gives the company real security. The business gains certainty that its know-how, developed contracts, and team are protected by a mechanism in which the cost of disloyalty drastically outweighs the potential profit from violating the rules. As a result, a professional agreement becomes not just a formality, but a strategic tool building the long-term value and stability of the organization.

It is therefore worth opting for a transparent model of cooperation, in which the protection of the company’s interests is a planned process, rather than a reactive one. A properly structured non-compete obligation organizes relationships within the organization and constitutes the strongest argument in dispute situations.

A professional approach to the non-compete obligation allows for avoiding distractions and focusing on building the company’s value based on clear rules:

• Precise definition of boundaries – effective protection requires considering which business areas are key for the company and giving them measurable frameworks in the agreement.
• Transparency and knowledge – clear guidelines provide certainty that management board members are precisely informed about their limitations, which eliminates any margin for subsequent interpretations or excuses.
• Awareness of decisions made – thanks to establishing clear rules of cooperation, we have certainty that any attempt to violate the company’s interests is a conscious choice of the manager, and not the result of misunderstandings.
• Procedural security – specific contractual provisions constitute the strongest argument in court, allowing for a swift reaction and enforcement of rights without the need to prove the precise amount of the loss incurred.
• Protection of the company’s foundations – a formalized non-compete obligation makes playing both sides economically unjustified, which effectively safeguards know-how and client relationships.