The Exit Toolkit · Sheet 15 of 20
Restrictive covenants
What a buyer can hold you to after the sale
Why they exist
The buyer is paying for goodwill. Covenants stop you taking it straight back by setting up next door or calling your old clients.
Non-compete
You agree not to carry on a competing business for a period, usually within a defined area or market. Two to three years is common on a business sale.
Non-solicitation
You agree not to approach existing customers or suppliers, and not to poach staff.
Courts allow more on a sale
Restrictions given by a seller who has been paid for goodwill are enforced more readily than those on an employee. Do not assume you can ignore them.
Negotiate the scope
Match the restriction to reality: the actual business sold, a sensible territory, a defined customer list. Carve out anything you plan to do next, and any existing interests.
Think about your next chapter
If consultancy, a new venture or even joining another firm in the sector is on your horizon, deal with it now, in the drafting, not later in a dispute.
Bottom line
Covenants are standard, but their breadth is negotiable. Tell your solicitor what you want your life to look like after the sale before these clauses are agreed.
General information only, not legal advice. Steven Mather Solicitor is a trading name of Kesters Nook Limited; legal work is carried out through Nexa Law Limited, authorised and regulated by the SRA (number 633024).