Before a buyer makes an offer to purchase a business, or enters into a formal contract of sale, they will usually request certain information about the business so they can make an informed decision about what offer to put forward. Such information might include things like profit, trading history, employee information, trade secrets and other intellectual property as well as customer and client data (to name a few).
Understandably, a buyer will need to obtain some of this information so they can decide whether the asking price is reasonable, whether the business is profitable and if the business is a worthwhile investment.
So as a seller of a business, should you be handing over this kind of information to a stranger? Generally, yes, a lot of this information needs to be passed across to the buyer.
The REIQ Business Contract of Sale contains provisions which protect the confidentiality of information passed between the parties and the confidentiality of the transaction itself. It provides both parties with remedies if confidentiality is breached.
However, in the initial stages of negotiation, the parties have not signed a sale contract so are not yet bound by these provisions.
We recommend that before any seller passes information to a potential buyer which they consider to be confidential information, they have the potential buyer sign a Confidentiality Agreement (otherwise known as a Non-Disclosure Agreement or “NDA”). A well drafted Confidentiality Agreement will prevent a potential buyer from disclosing any of the seller’s confidential information to third parties (with the exception of the buyer’s professional advisors) and provide the seller with legal remedies in the event of a breach.
The Small Business Lawyer are experts in business sales and purchases and can provide you with a legally binding Confidentiality Agreement to use in the sale of your business. Simply book a free 20 minute consult to discuss with us further.