The no-solicitation clause has become a mandatory clause as a mechanism to protect company value in Brazil, especially in significant transactions such as M&As, shareholder agreements, joint ventures, and strategic contracts.
More than just preventing the hiring of people or the acquisition of clients, it functions as an instrument for preserving intangible assets, preventing a party from taking advantage of their relationship, position, or function within the company to attract employees, clients, or suppliers.
Although the clause has gained prominence in recent years in Brazil, some points are not usually given due attention during negotiation, which can weaken its effectiveness.
We highlight the 4 most relevant points here:
1. Coverage: The solicitation clause doesn’t only refer to clients, and this point is often overlooked during the contracting process. It’s essential to establish who is included in its scope, which can encompass active clients within a specific period, qualified leads, strategic suppliers, and key personnel for the business. When this scope isn’t well-defined, the chances of conflict regarding the application of the obligation increase.
2. Definition of the Duration: In addition to setting the duration of the obligation, it’s essential that the clause objectively establishes when the restriction begins and ends. This clarity helps all parties involved understand exactly when the obligation will be in effect, especially in the case of suppliers and other partners. Very aggressive deadlines tend to generate resistance in negotiations and weaken the perception of the clause’s reasonableness in the event of litigation.
3. Defining the act of “soliciting”: Another sensitive point in Brazil that is not usually detailed properly is the practices that will be prohibited. This can be done through an illustrative list or specific acts, making it clear whether the mere attempt is sufficient to constitute an infraction, whether the prohibition includes direct and/or indirect actions, and to what extent it may extend to third parties linked to the parties involved. It also makes sense to provide for reasonable exceptions, such as spontaneous applications, open selection processes, or clients who seek the relationship on their own initiative.
4. Provision for remedies for non-compliance: The effectiveness of the obligation in Brazil depends on clear sanctions. Fines can be set at a fixed value or calculated based on the loss of revenue of the solicited client, for example, without prejudice to the collection of additional damages. And this point is essential. The fine must reflect not only the non-compliance but also the resulting damage.
Integrated with confidentiality, non-competition, and data protection clauses, the prohibition against solicitation ceases to be an abstract provision and becomes a robust instrument of corporate governance in Brazil, especially when its focus is less on limiting individual actions and more on preserving the integrity of the company’s relationships with partners and clients, being able to reduce litigation and preserve the value of the company.
