Strong client relationships are at the heart of every successful accountancy firm.
When a trusted senior accountant or client manager leaves, particularly to join a competitor, the risk of losing valuable client relationships can be far in excess of the recruitment costs of replacing them.
It is therefore essential that firms protect:
- Long-standing client relationships
- Commercially sensitive client and financial information
- Financial methodologies, pricing and specialist software tools
- The stability of teams and departments
Accountants naturally work closely with their clients and often become a trusted adviser and primary point of business advice, meaning clients may be more inclined to follow them if they choose to move on. The potential loss of revenue can therefore be significant.
The Institute of Chartered Accountants in England and Wales (ICAEW) has recognised that restrictive covenants are “generally the most effective way of protecting trade secrets, connections and confidential information”.
When carefully drafted and appropriately applied, restrictive covenants are a key tool that helps safeguard the firm’s most valuable assets, as our Professional Services Team explore below.
What are Restrictive Covenants?
Restrictive covenants are clauses within an employee’s contract of employment or service agreement which restrict an employee’s actions during or after their employment with the firm.
They aim to protect the legitimate interests of the employer’s business by placing limited, time-bound obligations on former employees after their employment ends to stop unfair advantage.
Restrictive covenants are commonly used to help ensure:
- Client relationships are not lost to a competitor
- Departing employees do not trigger further resignations
- Sensitive confidential knowledge remains at the firm and is not misused
- The value of the firm’s goodwill is protected
These protections must strike a fair balance between the firm’s legitimate business interests and the employee’s right to work elsewhere.
Otherwise, they may be held void and unenforceable.
Common Types of Restrictive Covenants in Accountancy Firms
There are four main types of restrictive covenants which accountancy firms may wish to rely on in employee contracts.
These include:
- Non-compete clauses – these protect a firm’s competitive advantage by preventing former accountants from working in a similar role at a competing firm or from setting up a rival practice immediately after leaving.
- Non-solicitation clauses – these protect client relationships by preventing former accountants from approaching or enticing clients (and other customers or suppliers) of their former employer.
- Non-dealing clauses: these also protect client relationships by preventing former accountants from engaging in or dealing with former clients (and other customers or suppliers) without the need to prove they were solicited by the former accountant.
- Non-poaching clauses: these protect work stability by preventing former accountants from enticing or encouraging their ex-colleagues to leave and join them elsewhere.
The type or combination of clauses that should be used depends on the accountant’s influence, seniority, level of trust, and exposure to sensitive information.
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