GUEST COMMENT: You want to start up your own business while still working in financial services. What are the legal dangers?

You’ve had enough. You’re bored of working in a bank, a broker, or a hedge fund. It’s time to move on. You have a brilliant idea for your own business – or to take to one of your employer’s competitors. But can you do it without giving up the day job?

This is a quick legal guide to what steps you can and can’t take before you take the plunge and leave your current job.

Red flags

These are real danger areas. If you cross the line here whilst still in work with your existing employer, you will risk dismissal, injunction proceedings and potentially having to pay back any profit you make.

• Approaches to clients/customers for business
• Diverting business from your current employer
• Making use of or passing on confidential information
• Making use of your employer’s facilities for your own business
• Obtaining funding for your business
• Asking colleagues to join you
• Accepting any commissions

Over and above this, if you are a director or a partner in the business you will owe a higher duty than ordinary employees. In this case, you must not do anything which would conflict with that duty to act in the best interests of the business. Further, if you have restrictive covenants (non-competition) clauses in your contract you should take advice before doing anything

Green flags

These preparatory steps are generally acceptable, provided they are done in your own time and do not conflict with any express clauses in your contract

• Discussing  ideas with friends and family
• Buying an off the shelf company
• Locating premises and signing a lease (but probably not fitting those premises out)
• Applying for a job with a competitor
• Research, for example  locating suppliers and  seeing what terms they offer
• Setting up a bank account

There is also a middle ground, where depending on your level of seniority and role in the company, it may be okay to:

• Tell colleagues what you are planning
• Tell clients you are leaving without going into detail about your future plans
• Draw up a business plan

Generally, to paraphrase a recent case you may: ‘be as agreeable, attentive and skilful as it is in your power to be to others with the ultimate view of obtaining the benefit of the customers' friendly feelings when you call upon them if and when you set up business for yourself.’

Jo Plumstead is a freelance writer & trainer and Consultant Solicitor with Setfords.