The Director Who Quietly Built a Second, Similar Company

The situation

Jae-won first noticed it on a Tuesday, reviewing the previous month's invoices before a bank meeting. A client he had personally onboarded two years earlier, a mid-sized property manager the company had done steady maintenance contracting work for, had not been billed in three months. He assumed a mistake, pulled the file, and called the client directly to check whether the relationship had lapsed. It had not lapsed. The client explained, without any particular concern in their voice, that they were still using the same crew and the same scheduling, just billed now through a different company run by Ivan, one of the company's three directors.

Jae-won and his co-founder Min-ji had built the business together five years earlier, starting with a handful of residential contracts and growing it into a company doing between a quarter and a full million dollars a year in commercial and residential maintenance work across the Hamilton area. By day, Jae-won still worked shifts as a letter carrier and Min-ji worked as a landscaper, both keeping their outside jobs even as the company grew, splitting evenings and weekends between their own families and the business they had built from nothing. Ivan had come on as the third director two years in, bringing an existing client list and a strong reputation in property management circles that had genuinely helped the company grow.

What Jae-won did not know, standing in his kitchen with the phone still in his hand, was how far the pattern actually went. Over the following days he pulled records on a handful of other accounts and found the same quiet shift: clients still receiving the same service, still dealing with the same familiar face, but paying a company that was not theirs. Ivan had been directing new and existing business toward a company he controlled personally, using contacts, scheduling systems, and goodwill that had been built under the original company's name.

Min-ji's reaction, once Jae-won brought it to her, was to confront Ivan directly rather than involve anyone else. Ivan was apologetic in the moment, agreed to stop, and offered a verbal commitment to hand back two of the clients. Nothing was put in writing. For several weeks, Jae-won and Min-ji believed the matter was settled and tried to move on without further conflict, until a third client mentioned, almost in passing, that Ivan had quoted them on a new contract the week before.

What was actually at stake

A director of a corporation owes the company a duty of loyalty, generally described as a fiduciary duty, which includes not competing with the company or diverting its business opportunities for personal gain while still serving as a director. That duty exists whether or not it is written into a shareholder agreement, and it does not require proof that a director acted maliciously, only that the director put personal interest ahead of the company's when the two conflicted. Ivan's outside company, using the same clients, the same crews, and the same scheduling relationships built under the original business, sat squarely inside that conflict.

What made the situation harder to unwind was how long it had been allowed to run before anyone outside the company knew about it. By the time Jae-won and Min-ji came to us, months had passed since the first quiet client shift, and Ivan's separate company had built its own track record with several accounts that had once belonged, in substance if not in name, to the original business. A verbal promise to stop, made once and then apparently ignored, had no evidentiary weight and had already cost several more weeks in which the diversion likely continued.

The stakes went beyond the handful of clients already identified. If Ivan's conduct had continued unaddressed for much longer, the company risked losing not just individual accounts but the broader relationships and reputation those accounts represented, the kind of goodwill that takes years to rebuild and cannot easily be assigned a dollar figure after the fact. There was also a harder question sitting underneath the obvious one: whether pursuing a full legal claim against a sitting director, with the cost, delay, and internal disruption that would involve, made sense for a company of this size, or whether the more realistic goal was to stop the bleeding, recover what could reasonably be recovered, and remove Ivan from a position where he could keep doing it.

Jae-won and Min-ji had already tried the informal route once and watched it fail. That mattered for how the file had to be run from that point forward. Every step now needed to be documented, every commitment needed to be in writing, and the company needed a clear record of what had happened in case a dispute ever had to be resolved formally rather than by handshake.

What we did

1. Reviewed the company's records to map the actual scope of what had happened. We went through invoicing history, service schedules, and correspondence with the affected clients to build a factual timeline of which accounts had shifted, when, and how much revenue was involved, rather than relying on Jae-won's initial impression of a handful of clients, which turned out to understate the real number once the full billing history was pulled.
2. Assessed the strength and limits of a formal claim against Ivan. A director's breach of fiduciary duty can support a claim for the company's losses, but proving the full scope of diverted business, and collecting on a judgment against an individual director whose personal assets are uncertain, is often slower and less certain than it looks from the outside, and we gave Jae-won and Min-ji a realistic view of both the cost and the odds before recommending a path forward rather than promising an outcome we could not guarantee.
3. Sent a formal written demand to Ivan, replacing the earlier informal conversation. The letter set out the specific accounts affected, demanded that Ivan cease competing activity immediately, and put him on notice that the company was prepared to pursue a formal claim if the conduct continued, which carried far more weight than the verbal exchange Jae-won and Min-ji had relied on the first time and that Ivan had quietly ignored.
4. Negotiated Ivan's departure from the company rather than a drawn-out internal fight. Given the practical limits of what full litigation would likely recover once legal costs, delay, and collection risk were factored in, we negotiated an exit agreement that removed Ivan as a director, secured a written non-solicitation commitment for a defined period, and returned two of the diverted accounts to the company.
5. Documented the settlement terms in a formal, signed agreement. Unlike the earlier verbal promise, this agreement specified which clients Ivan could not solicit, for how long, and what would happen financially if he breached it, giving the company something enforceable in writing rather than another promise to take on faith after the first one had already failed.
6. Advised on which accounts were realistically recoverable and which were not. Several clients had already committed to new contracts with Ivan's company and had no legal obligation to return, so we helped Jae-won and Min-ji focus their energy and goodwill on retaining the relationships still open to being saved rather than spending months chasing every account that had already shifted for good.
7. Reviewed remaining client and vendor contracts for similar exposure. Ivan's departure had shown how much of the company's revenue sat on a single director's personal relationships rather than on the company itself, so we checked whether other key accounts depended the same way on one person's rapport. We flagged two accounts where the company should build a second point of contact, so the business was not similarly exposed if another director or key employee ever left under difficult circumstances.
8. Drafted a written policy on directors' outside business activity for the company to adopt going forward. The policy required directors to disclose any outside business interests annually, prohibited soliciting the company's clients for a competing venture while serving as a director, and set out a clear internal process for the board to raise and address a conflict early, before it could run for months undetected the way this one had.

The outcome

The company recovered two of the diverted accounts and secured a written commitment from Ivan not to solicit its remaining clients for a defined period. Several other accounts, already resettled with Ivan's new company by the time the matter was addressed formally, were not coming back, and Jae-won and Min-ji had to accept that loss as final rather than continue chasing it through a longer and more expensive process against a former director with an uncertain outcome at the end of it.

The revenue lost to the accounts that did not return was real and measurable, cutting meaningfully into the company's growth for that year, though it did not threaten the business's underlying stability. What mattered more was that the losses stopped where they did rather than continuing to compound month after month, and that the company avoided a prolonged legal fight against a former director whose personal assets and ability to pay a judgment were themselves uncertain, a fight that could easily have cost more than the accounts were worth even if it succeeded.

Jae-won and Min-ji came out of the experience with a clearer sense of how exposed the company had been to a single director's personal relationships, and with a written policy that gave them an actual process to follow the next time a conflict of interest showed up rather than a handshake and an assumption that it would not happen again. Ivan left the company within a month of the settlement, and the non-solicitation term ran its full course without a further breach reported.

It was a hard lesson, and not one they got to walk away from without cost. The company's revenue that year came in noticeably below what it had projected before the diversion came to light, and it took roughly a year of steady client development to fully close the gap. But the damage stayed contained once Jae-won and Min-ji moved from an informal conversation to a properly documented, formally negotiated resolution, and the business has run without a repeat of the problem in the years since.

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