How can I prevent the seller setting up in competition after the sale?

Restrictive covenants can be inserted into the sale agreement. These normally specify that:

  • the seller will not be involved in a competing business.
  • the seller will not solicit customers or key employees.

To be enforceable these clauses will need to be reasonable in terms of business covered, duration and geographical area.

Often there will be negotiated “carve-out” exceptions to allow the seller some scope post-sale, particularly where it is a sale of part-only of a business.