An important element in a business sale is the preparation of appropriate confidentiality agreement. Confidentiality agreements are sometimes referred to as non-disclosure agreements.
Often the seller is selling the business to a purchaser who either operates in the same market or is intending to operate within that business sector. It is critical that the purchaser enters into a confidentiality agreement with the seller before the due diligence process begins.
Without a confidentiality agreement, the purchaser would have access to the seller’s highly confidential commercial information. This could prove significant if the transaction does not proceed and the purchaser attempts to conduct business within the same sector.
A robust confidential agreement safeguard the seller’s intellectual property and confidential information. It will also provide specific terms that address the use of the information should the transaction not proceed.
A confidentiality agreement can also be used to remove any uncertainty as to what amounts to confidential information by carefully definition. This enables a seller (within reason) to protect information that would not ordinarily be recognised as confidential information. The parties can agree what is to be covered by the agreement and consequently what is to remain confidential going forward.
If there is a subsequent dispute the confidentiality agreement will provide a strong evidential document on which the parties can rely. It is written evidence of the information was disclosed, the terms on which it was disclosed and what the parties were expected to do with the information provided.
The remedy for breach of a confidentiality agreement is damages. Other remedies can include injunctions to prevent further disclosure or from any third party receiving the confidential information from using it.
Ashbrooke Law. Innovative. Commercial. Responsive.
Disclaimer
Ashbrooke Law publications are intended to provide guidance and general information. They should not be relied upon as legal advice. Formal legal advice should be sought on matters of interest arising from this article.