A Business Sale Non-Disclosure Agreement (NDA) is an agreement between a business buyer and seller. In a standard NDA, both parties agree to keep the transaction details private, and in the business sale, one also contains confidentiality for sensitive information relating to the business.
When To Use
- To buy or sell a business
- To protect trade secrets and intellectual property
- To protect financial and operational details
- To protect private details about individuals connected to the business
- To prevent disclosure of information related to the sale itself
Why Use a Business Sale NDA
You may include the NDA as part of the business purchase agreement for a new owner, but it is also helpful as part of a buy-sell agreement should a co-owner or partner choose to leave the company. A business purchase non-disclosure agreement provides the following benefits for the buyer and the seller.
Prevents Misuse of Confidential Information
When deciding to purchase a business, a buyer typically requires access to sensitive information. They must know how the company operates and gauge its financial stability to make an informed decision.
Financial documentation, trade secrets, and operational details provide critical data; however, this information can harm the business if it falls into the wrong hands. An NDA keeps this information confidential so it cannot be disseminated to competitors, customers, or employees.
Directs Disposal of Proprietary Information
A business sale non-disclosure agreement outlines ways the potential buyer must dispose of private business information. This ensures that both parties know how to handle sensitive information. Disposal details are essential when multiple potential buyers have access to sensitive information.
The document requires all business records and data to be returned or safely disposed of.
Limits Knowledge of the Potential Sale
A business sale non-disclosure agreement typically incorporates a clause preventing participants from discussing the sale with employees, customers, and other interested parties. Leaked information about a potential deal could compromise employee morale and have a cooling effect on the business.
Pre-Qualifies Potential Buyers
A business sale non-disclosure agreement is a standard requirement when selling a business. If a buyer refuses to sign the document, they may not be serious about purchasing.
Pre-qualifying potential buyers with a non-disclosure helps you limit who has access to private business information.
An NDA for a business sale should include the following elements:
- Business name
- State of incorporation
- Potential buyer name
- The effective date
- Limitations for disclosure of confidential information
- Types of information protected
- How to dispose of or return sensitive business information
- Limitations on contact with employees, suppliers, and customers
- Potential buyer’s printed name, date, and signature
Who Drafts the NDA and Who Signs It?
The seller typically drafts a business sale non-disclosure agreement since it is the information they protect. The potential buyer signs the NDA as part of the pre-qualification process.
If the buyer wishes to protect their financial information relating to the sale, they may consider creating a financial information non-disclosure agreement, which covers both parties’ financial information.