So here is a question that does not often arise: If a company shuts its doors and just ceases doing business what happens to the employee obligations not to compete? The short answer is that if a company just shuts down and stops doing business without a successor (and that is the key), then it is not in a business against which one can compete so in all probability you can go forth and don’t worry. But, that almost never happens even when it happens. Think about the following:

Employee noncompetes are assets of the defunct company. More often than not, defunct companies don’t just get shut down, their assets, including intangibles, are often sold at a song to some buyer who thinks it is getting a bargain purchase. In many situations, there is a formal purchase and sale agreement and the employees are dealt with in a clear and explicit way. However, it is possible that the company shuts down and lets everyone go after which, at some time in the future perhaps a month perhaps several months, the company finds someone who is willing to buy the IP. Consider what happens to the noncompetes in this circumstance. In a perfect world, from the employee perspective, and it is rarely perfect from the employee perspective in this situation, the employee gets a release from the defunct company when he or she leaves under these circumstance. More probably that will not happen and there will be a risk going forward.