Restrictive Covenant

A restrictive covenant is where an obligation is imposed on an employee or director either in an employment contract or financing document preventing the employee/director from doing something during or after his employment has terminated. This usually covers engaging in competitive businesses or poaching staff or customers.

Particularly where post-employment issues are addressed (e.g. competition), care is required in drafting as the terms may be unenforceable if they are unreasonably wide.