The covenants are usually the last thing negotiated and the first thing that matters afterwards. They decide whether you can advise again, who you can speak to, and what you can say when a former client rings you, which they will. Sellers routinely give this section five minutes at the end of a long process and then live inside it for years.
Why a sale covenant is not an employment covenant
Owners who have seen restrictive covenants in employment contracts often assume the same latitude applies. It does not, and the difference runs against you.
The courts have long treated covenants given by a seller of a business more generously to the buyer than covenants imposed on an employee. The reasoning is straightforward: an employee has unequal bargaining power and is selling only their labour, whereas a seller has been paid for goodwill and would be taking back what they sold if they immediately competed for it. A covenant that would be struck down in a contract of employment can be perfectly enforceable in a sale agreement.
The practical consequence is that "it is too wide, it would never hold up" is a much weaker position than sellers expect. Assume the covenant you sign is the covenant you are bound by.
The four clauses, and what each one actually stops
Non-compete. You will not carry on a competing business within a defined area for a defined period. The two variables are duration and geography, and for an advice firm geography is often the wrong tool: clients are national, meetings are remote, and a radius drawn around an office may either mean nothing or accidentally cover most of your working life.
Non-solicit. You will not approach former clients. This is the clause the buyer cares about most, because it protects the recurring income they paid a multiple for, and with recurring income accounting for over 80% of offers on Gunner & Co's figures, it is protecting most of the price.
Non-deal. You will not act for former clients even if they approach you. This is the one that surprises people. Non-solicit stops you calling them; non-deal stops you saying yes when they call you. A seller who has agreed a non-deal covenant and then takes on a client who sought them out unprompted is in breach, however the conversation started.
Non-poach. You will not recruit former staff. Usually the least contentious, and usually the one that outlasts your interest in it.
What to negotiate, in order of value
Carve out the people you were always going to help. Family, close friends, anyone you advise without charge. A named carve-out schedule is normal, is easy to agree at the time, and is impossible to obtain afterwards.
Fix the definition of client. "Any client of the business" can be read to include people who left five years before the sale and clients you never met in a firm you never worked in, if the buyer's group is large. Restrict it to clients you actually advised, within a defined period before completion.
Argue duration against the earn-out period, not in isolation. If you are staying on for a period and the covenant runs from the end of your involvement rather than from completion, the total is far longer than the number in the clause suggests. Establish which date it runs from. This is often the single largest hidden term in the agreement.
Replace geography with client lists where you can. A well-drafted non-solicit and non-deal protects the buyer's actual interest more precisely than a radius, and leaves you able to work. Buyers frequently accept this because it is more enforceable, not less.
Get the "what if the deal partly fails" case written down. If the buyer never pays the deferred consideration, are you still bound in full? Silence here favours the buyer.
The regulatory layer sits on top
A covenant is a private contract, and it does not touch your regulatory position. Two things follow.
Your permissions and your status on the FCA Register are separate matters, and if you intend to advise again in any form the timing of any change to your authorisation is worth planning alongside the covenant rather than after it.
And the FCA's expectations of firms selling client banks are clear that the client bank is the firm's asset and that it will act where client banks are sold with redress liabilities left behind. Your covenant obligations to the buyer and your regulatory obligations regarding past advice are different things with different timescales. Complying with one does not discharge the other, and liability for past advice covers the second.
When a former client rings you
They will, usually within the first year, usually because something changed and they want to know what you think.
If you have signed a non-deal covenant, the fact that they made contact does not help you. The safe response is the honest one: say you are not able to advise them, that you are contractually restricted from doing so, and point them at the firm now responsible for their advice. It feels unsatisfying and it is correct.
The conversation is far easier if you decided in advance what you would say, and easier still if you told your clients clearly at the point of sale who now looks after them, which is covered in telling your clients.
The summary
Read the covenant schedule as carefully as the price. Establish which date it runs from, get the client definition narrowed, get your carve-outs written in, and assume every word of it is enforceable. It is the clause that shapes what your professional life looks like on the day after the money finishes arriving.
Covenants are part of the price, not a formality attached to it
It helps to see the covenant schedule as consideration flowing the other way. The buyer is paying a multiple for goodwill, and the covenants are what stop that goodwill walking back out. Viewed that way, a wider covenant is worth more to the buyer, which means it is something you are giving rather than something you are conceding.
That reframing has a practical use at the table. If a buyer wants a longer non-compete or a broader client definition, it is legitimate to treat that as a commercial ask with a commercial answer, rather than as a legal formality to be tidied up by the solicitors. Sellers who negotiate covenants late, in isolation from price, give away real value for nothing, because by then the number is agreed and the only variable left is how restricted you are.
Establish what the firm is worth before that conversation, so you know what proportion of it the covenant is protecting. This site's free IFA valuation calculator produces a range from your recurring income, and the point of holding that figure in mind is not to argue about it but to recognise that a buyer asking for a five-year restriction is protecting a sum large enough to justify paying you properly for it.
What to do if you intend to work again
Many sellers say they are retiring and then, eighteen months later, find that they are not. The covenant you signed on the assumption of full retirement is the one that governs the person who has changed their mind.
If there is any realistic prospect of continuing to work in advice, in any form, three things are worth doing at the time of the sale rather than later.
Establish clearly what is permitted: consultancy to firms that are not competitors, non-advisory roles, paraplanning, training, professional connections work, or advising in a different discipline entirely. A covenant drafted to catch "any business competing with the business" may catch far more than you assumed.
Get the geographic and client-based restrictions separated. It is common to end up bound by both when only one was intended, and the combination can be considerably wider than either.
And take your own legal advice on the schedule specifically, not just on the agreement as a whole. The covenant clauses are short, they are usually presented as standard, and they are the provisions most likely to affect your daily life for years after everything else has been forgotten. An hour of a solicitor's time on that schedule alone is among the best-value spending in the entire transaction.
Read next: staying on after completion, warranties and indemnities, and the rest of the after the sale pillar.