X was employed by Bee Ltd as its senior design consultant. X contracted with Bee Ltd that, when his employment with the company ceased, he would not act in competition with it or solicit its customers. After X left Bee Ltd, he registered a company called Cee Ltd which immediately began working in competition with Bee Ltd and soliciting its customers. Bee Ltd complained to X about this conduct, but X stated that, as the work was being undertaken by Cee Ltd, a separate legal entity, X had not acted in breach of the agreement with Bee Ltd.
Which of the following statements is correct?
- X is correct and cannot be said to be in breach of the agreement with Bee Ltd.
- If the court finds that Cee Ltd was set up by X to avoid the agreement with Bee Ltd, it will "lift the corporate veil" and enforce X's contract with Bee Ltd against X and Cee Ltd.
- Cee Ltd will be bound by the agreement because a company is always liable for the actions of its shareholders.
- The agreement between Bee Ltd and X is of no legal effect, as it attempts to regulate X's activities after he has left Bee Ltd's employment.