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Thoughts About Restrictive Convenants for CPA Firm Partners

May 2015 -

I spend a good amount of time speaking with managing partners about their goals including lateral partner hiring and also speaking with partners who are contemplating making a change. One of the common elements for both sides is dealing with restrictive covenants. Over the years, I have seen many such agreements and have been involved with and seen the resolution of the agreements when partners depart. I am happy to share that 95% + of the time these issues are resolved amicably, though not without some degree of tension.

This is a very sensitive topic as the decision for a partner to resign is quite difficult as is the decision for a firm to terminate or ask a partner to leave.  These are almost always long term  relationships within the firms and with their clients.  In addition, while the New York metro area encompasses several million people, our CPA community is small and close-knit,  so I think its almost imperative to try and separate on as good of terms as possible.

Resolution of the restrictive covenants is probably the most difficult issue in cases like this, as no one wants the cost and distraction of litigation.  And, I can say from  first hand experience,  these issues are almost always settled through negotiation and not litigation.

The best way to minimize such disputes is to have a well-crafted and fair agreement from the start. To that end, I would like to share an excellent article about restrictive covenants from a valued business colleague, Michael Lasky of the law firm of Davis and Gilbert.

The CPA Journal,  "The Increased Importance of Non-Compete Agreements for Accounting Firms" 

Here are my main observations on this article and topic:

If you are a partner contemplating a change or a firm seeking to be sure your covenants are fair, I hope this is helpful. I am happy to provide confidential input if you have questions.

If you would like to discuss this or any other issues related to your practice or career, please don't hesitate to contact me. My direct line is (212) 490-9700. Or email me at rfligel@rf-resources.com.  Absolute confidentiality always assured.

Robert Fligel

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rfligel@rf-resources.com

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