Imagine spending years building a virtual asset fund management business, only to watch your departing Portfolio Manager walk through the door of a direct competitor and then discover that the non-compete clause you relied on is unenforceable.
That is precisely what happened to the employer (the “Company”) in the recent case of Pando Finance Limited v Ng Ean Kiam [2026] HKCFI 1046. The Company sought an interlocutory injunction to stop its former Portfolio Manager (the “Employee”) from joining a rival firm (the “Competitor”) and allegedly using the Company’s confidential information, including its Securities and Futures Commission (SFC) filings and exchange-traded fund (ETF) product applications, to compete against it. But the court refused.
Post-termination restrictive covenants (PTRs) are a critical line of defence for employers wishing to protect trade secrets, client relationships and competitive advantage after an employee departs. But in Hong Kong, PTRs are presumptively void. Courts will only uphold them if the employer can prove that the restriction is no wider than reasonably necessary to protect a legitimate business interest and is reasonable in all the circumstances.
The bar is high and this case shows just how easy it is to fall short of it.
The facts of this case serve as a cautionary tale: a PTR that is too wide in scope, too long in duration and unrestricted in geography is not just imperfect, it is worthless. Employers who invest in attracting and developing senior talent should ensure their contractual protections are equal to that investment.
What happened
The Employee was a Singaporean national and a seasoned fund manager with over 30 years of experience in financial services. He held Responsible Officer status under the SFC for regulated activities Types 1, 4 and 9. He joined the Company as Portfolio Manager in February 2024 and was confirmed as permanent staff in May, at which point he signed a confirmation letter containing a 12-month non-compete covenant.
He resigned on 9 January 2025 and left on 8 April after serving his three-month notice period.
Within weeks, he joined the Competitor as Managing Director and Senior Portfolio Manager. His SFC licence was transferred to the Competitor on 29 April, a publicly available update on the SFC’s website. The Company alleges it only discovered the move in approximately July 2025, when the Competitor launched virtual asset ETF products that appeared similar to those of the Company.
The Company issued a cease-and-desist letter on 5 August and commenced proceedings on 22 August, some four months after the Employee had already joined the Competitor. In an earlier skirmish, the court had already refused to grant an interim-interim injunction, finding that the Company had failed to prove urgency and that the balance of prejudice did not favour restraint.
The Company’s application for an interlocutory injunction suffered the same fate.
Because the 12-month restriction period would expire in April 2026, before any trial could realistically take place, granting the injunction would have amounted to granting final relief. The Company therefore faced a heightened threshold. It needed to show that it had good prospects, or better prospects of success than the Employee. Simply showing a “serious issue to be tried” would not be enough. The Company could not clear that bar.
Drafting failures that doomed the clause
The court identified three fundamental flaws in the non-compete clause, each of which independently undermined its enforceability. Employers should treat each as a checklist item when auditing their own PTRs:
- No geographical limitation—worldwide reach, zero enforceability. The clause contained no geographical restriction and purported to bind the Employee globally. The Company tried to justify a worldwide restraint on the basis that virtual asset ETF products launched overseas would be “easily accessible” to Hong Kong investors. The court rejected this reasoning: the stated purpose of the clause was to protect confidential information relating to the Company’s SFC applications—information that had little relevance to ETF products launched in other jurisdictions under the oversight of different regulators. The court also noted that a worldwide restraint was particularly difficult to justify given that the Employee was a Singaporean national with prior employment ties to Singapore. Absent a compelling justification, courts will not hesitate to strike down a clause of this kind.
- No evidence to justify 12 months—duration must be grounded in fact. The Company adduced no evidence that the confidential information it sought to protect—primarily its SFC applications and related filings—had a commercial shelf life warranting a 12-month restriction. There was no evidence of operational strategies or special intelligence that would continue to be sensitive for that period. The lesson: duration must be calibrated to the actual lifespan of the information or interest being protected, not chosen as a round number.
- Scope too wide—captured the entire industry, not just competitors. The clause extended to “any other business or entity … which directly or indirectly competes with the business of the Group.” Because the Company’s business was not expressly limited to virtual asset management, the court found the clause would have prevented the Employee from joining even traditional asset management firms with no connection to virtual assets whatsoever. The Company argued the clause should be read narrowly to cover only virtual asset competitors, but the court found that construction was not supported by the language of the clause or its surrounding context. If you intend to limit the clause to specific sectors or activities, say so expressly.
The court also found that the Company had failed to demonstrate good prospects of establishing a breach. Despite alleging that the Employee had divulged confidential information, including SFC filings and email communications with regulators, the Company could not identify the specific information it sought to protect with sufficient particularity. Critically, certain of the Company’s ETF-related documents (such as prospectuses) were publicly available on the SFC’s website, meaning they could not be characterised as confidential. The court also noted that the Competitor’s draft prospectuses had been prepared before the Employee joined, which undermined any inference that he had used the Company’s confidential information to assist the Competitor.
The broader principle is that an employer cannot restrain a former employee from deploying skill and knowledge acquired during employment for a new employer’s benefit. Employers must be specific and accurate about what information they are truly protecting.
On the balance of convenience, the court found in favour of the Employee on every count. The Company failed to demonstrate any real risk of irreparable damage, particularly given that the Employee had already provided confidentiality undertakings (which the Company acknowledged were enforceable as court orders).
By contrast, the Employee faced serious prejudice from real risk of losing his employment, lasting reputational stigma from an abrupt termination and impeded career development. This was made more acute by the fact that he had been unemployed for around a year before joining the Company, demonstrating difficulties he faced in the job market.
The delay compounded the Company’s difficulties. The Employee’s SFC licence transfer to the Competitor had been publicly available on the SFC’s website since 29 April 2025. The Company’s own CEO had been informed in February 2025 that the Employee intended to take up new employment in “mid-April 2025”. News of the move was also known among the Company’s own staff shortly after the SFC update appeared. Even accepting the Company’s case that it only learned of the new employment in approximately July 2025, there was still an unexplained gap of around four to six weeks before proceedings were commenced.
As the court noted, in a case where granting interim relief would amount to granting final relief, delay is a weighty factor, and one that employers ignore at their peril. The Company also did not offer the Employee alternative employment during the restriction period, which further tipped the balance against it.
The court dismissed the Company’s application and ordered costs against it.
What employers should do now
This case is a practical reminder that non-compete clauses are not self-enforcing shields. Here is what employers should review immediately.
Add a geographical restriction—and justify it. A worldwide restraint will rarely be enforceable unless the employer can specifically demonstrate why global coverage is necessary to protect the identified interest. Match the geography of the restriction to the geography of the business the employee is actually involved in.
Tailor every clause to the employee and interest you are protecting. A one-size-fits-all PTR is a false economy. The scope of the restriction must be proportionate to the employee’s actual role and the specific confidential information or client relationships at stake. Conduct a clause-by-clause review and consider whether your existing PTRs remain fit for purpose for key employees whose roles have evolved since their contracts were signed.
Act fast—and monitor public registers. Delay can be fatal to an injunction application. Employers should have a process for monitoring the SFC register and other publicly available licensing databases or platforms so they are not caught off-guard when a former employee moves to a competitor. If you suspect a breach, take legal advice and move immediately. Weeks of unexplained inaction could cost you the right to relief entirely.
Review and update PTRs at key career moments. PTRs are interpreted as at the date the contract was entered into—a clause drafted for a junior hire may offer far less protection once that person has been promoted to a senior role with access to sensitive strategy, client relationships or regulatory know-how. Build a practice of revisiting PTRs on promotion, role change or on the expiry of a significant period of employment.
The judgment is available here.
For a more detailed discussion on the relevant legal principles on PTRs, please refer to our earlier legal update at: https://www.jsm.com/publications/2024/hong-kong-restrictive-covenants/
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