5 Important Elements of a Confidentiality Agreement

When getting ready to sell, every business owner should be concerned about maintaining confidentiality. Owners do not want the public to know that they are selling their business. Most certainly they don’t want their employees or competitors to know. Business owners looking to sell their business will have to let prospective buyers know about their business. In this article we will explore key elements that a good confidentiality agreement should cover.

Type of Negotiations

The type of negotiation is quite important in a confidentiality agreement. It stipulates whether the negotiations are secret or open. This part of the confidentiality agreement will outline what information can and cannot be revealed.

Duration of the Agreement

The agreement must be 100% clear as to how long it is in effect. If possible, you confidentiality agreement should be permanently binding.

Steps to Take if a Breach Occurs

Outline steps that will be taken in the event that a breach does occur. A confidentiality agreement that spells out what steps you will take if a breach does occur will help to enhance the effectiveness of your contract. You want prospective buyers to take your contract very seriously. This step will help make that a reality.

Special Considerations

Special considerations should be elements that apply to the business in question. One example of this is patents. A buyer could learn about inventions while “kicking the tires”. You will want to be quite certain that any prospective buyer realizes that he or she must maintain confidentiality regarding any patent related information.

State Laws

A confidentiality agreement should include any applicable state laws. If the prospective buyer is located outside your state, then this is an issue that must be adequately addressed.

A confidentiality agreement is a legally binding agreement. It is important that all parties involved understand this critical fact. Investing the money and time to create a professional confidentiality agreement is time and money well spent. The team at EBIT Associates can help you navigate not just the confidentiality process, but also the process of selling a business in general. Download our Seller’s Guide to help you get started.



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