Restrictive covenants can be a powerful safeguard, but they are only effective if they are well drafted and carefully tailored.
Overly broad covenants that are wider than necessary are unlikely to be enforceable, leaving firms exposed precisely when they need protection the most.
Our Professional Services Lawyers have created a checklist outlining the key considerations for accountancy firms when drafting or reviewing restrictive covenants.
1. Identify What You Are Protecting
You must be clear about the legitimate business interests you are trying to protect. In accountancy firms, these interests typically include:
- Client relationships – to reduce the risk of client loss
- Confidential information – such as pricing structures, advice strategies, or client data.
- Trade secrets – financial models, unique accountancy methodologies or specialist software tools.
- Workforce stability – preventing loss of key accountants, client managers and departments.
- Goodwill – loss of key clients and people can significantly damage the value of your firm.
Once these interests have been identified, specific protection can be put in place to provide targeted protection.
2. Tailor Restrictive Covenants to the Individual Role
Many employers rely on standard contract templates, but restrictive covenants are not a one-size-fits-all exercise.
Key employees in an accountancy business have different roles, levels of client contact and access to confidential information.
It is important to tailor restrictive covenants to the individual as the more specific the protection, the more likely it is that the covenants will be enforceable.
Points to consider are:
- How much client contact and sensitive information the role involves
- What types of work are carried out (and what are not)
- What geographic area does the role operate in
- How senior is the role
- How much influence is there over clients and colleagues
- Using bespoke clauses for different levels of seniority, such as partners, managers and support staff
- Avoid using the same clause across all employee contracts
3. Keep the Restrictions Reasonable
Reasonableness is the cornerstone of ensuring that restrictive covenants are enforceable. Consider the following:
- Scope: Is the restriction limited to cover only relevant clients or services?
- Geography: Is it limited to the area where the employee actually works?
- Duration: Is the length appropriate for the role, and does it go no further than is needed to protect legitimate business interests? (They typically range between 3 and 12 months)
4. Use Clear and Specific Wording
Ambiguity is your enemy. Make it easy to understand who and what the restriction covers.
- Define key terms such as “Client,” “Company” and “Confidential Information.”
- Specify the relevant period.
- Use plain language - clear wording makes the restriction easier to understand and more likely to be enforceable.
5. Review Restrictive Covenants Regularly
No matter how well a restrictive covenant is drafted, it can become outdated as your firm grows and evolves.
- Review the restrictive covenants when employees are promoted or change roles.
- Update the restrictive covenants after mergers, acquisitions, or any restructures.
- Plan regular audits of your contracts of employment into your HR processes.
6. Document and Maintain Clear Records
Good record-keeping makes enforcement faster and easier if disputes arise.
- Ensure employees understand the purpose of the restrictions
- Keep signed copies of the restrictive covenants and any updates to them
- Remind departing employees of their obligations at exit interviews
7. Get Specialist Advice
Restrictive covenants can make or break your ability to retain clients and protect your business. Taking a proactive approach now can save costly disputes later and give your firm confidence when key people move on.
Legal advice helps you:
- Audit and strengthen existing contracts.
- Draft bespoke clauses that protect your business interests in line with your business model and strategy.
- React quickly to potential breaches.
Contact Our Professional Services Team
Myerson’s Professional Services team regularly advises accountancy firms on drafting and enforcing restrictive covenants that protect client relationships, confidential data, goodwill and the firm’s competitive position.
0161 941 4000
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Amy Salim
Associate
Amy is an Associate Solicitor in the award-winning Employment team at Myerson, bringing a wealth of experience and a strong academic background to her role.
She studied Law at the University of Manchester, graduating with a 2:1. Amy then completed her Legal Practice Course at BPP University, where she achieved a Distinction.
Amy joined Myerson’s Employment team in December 2022 and quickly demonstrated her expertise and dedication, earning a promotion to Associate Solicitor in September 2024.
About Amy Salim