The Importance of a Non-disclosure Agreement

A non-disclosure agreement otherwise known as a confidentiality disclosure agreement or NDA/CDA, is a legally binding document that safeguards business owners during the sale of their business. When selling a business, part of a potential buyer’s due diligence is to investigate your business from a to z; examining profitability, financial statements, staff rosters and often sensitive information that you don’t want made available to the public. Importantly, you do not want that information to be used in future competition against the business.  So, what’s stopping a prospective buyer from reviewing your information and telling their friends? A non-disclosure agreement.

What is a non-disclosure agreement?

An NDA prohibits the signed parties (interested buyers) from disclosing any information about your business to external parties and which is not readily available to the public. It isn’t necessarily mandatory, especially for businesses that are very transparent and not concerned about information becoming available to the public (e.g. some public companies). However, if the buyer is potentially viewing proprietary or confidential information about your business, it is highly advisable that a non-disclosure agreement be signed.

When is an NDA used?

NDA’s can be used in various industries, where people want to keep confidential information solely between the parties involved. Whether that’s in business transactions or during acquisition or dismissal of employees, NDA’s can be incredibly beneficial to the person of whom the confidential information belongs to at that point in time, as it safeguards that information from becoming common knowledge. Think of NDA’s as a more legal version of a promise. The person signing the NDA is ultimately promising to keep their lips sealed about the topic in question, which in this case – is your business information.

What do NDA’s typically include?

Non-disclosure agreements typically include legal clauses that state that information made available between the parties in question (business owner and potential buyer) must remain confidential. Generally, any information obtained by the buyer about the business from any other source is not covered within the NDA, as it was not part of the confidential knowledge transaction outlined within the NDA.

Where do I obtain an NDA?

Understanding NDA’s are key to using them efficiently and correctly. At Core Business Brokers, we have years of experience dealing with non-disclosure agreements between business sellers and prospective buyers. If you are looking to sell your business, chat to us today. We will go through the process with you and explain all key areas of interest, allowing you to feel confident in your business sale endeavours.

Contact Core Business Brokers today, on (02) 9413 2977, or email Roy on [email protected]. We’re always to schedule an appointment and to chat through your options.