Non-Solicitation

A non-solicitation clause is a post-closing restriction that prohibits the seller from actively approaching or recruiting the business's customers, employees, or suppliers — without necessarily preventing the seller from operating in the same industry or offering competing products or services. It is legally and practically distinct from a non-compete clause, which prohibits competitive activity more broadly.

Non-solicitation and non-compete clauses often appear together in a purchase agreement, but they protect different interests. The non-compete prevents the seller from entering the competitive market; the non-solicitation prevents the seller from targeting the specific relationships — customer lists, employee relationships, supplier terms — that were part of what the buyer paid for. A seller may be permitted to start a competing business after the non-compete period expires, but may remain prohibited from reaching out to former customers or rehiring former employees for a longer period under the non-solicitation provision.

Non-solicitation clauses are generally more easily enforced than broad non-compete clauses under Canadian common law, which subjects non-competes to a reasonableness test. Courts have found non-solicitation provisions — which are more targeted and less restrictive of economic freedom — to be enforceable in circumstances where a broad non-compete would be struck down. Duration and geographic scope still matter: a reasonable non-solicitation clause covering former customers for 24–36 months post-closing is typically defensible; an unlimited or open-ended clause may not be.

See also: Non-Compete, Purchase Agreement, Representations and Warranties, Closing.