When selling a business, protecting sensitive information is a top concern. A confidentiality agreement, sometimes synonymous with a non-disclosure agreement, fulfills that exact purpose.
Drafting a confidentiality agreement with all the necessary terms and conditions will help private information remain secure throughout the transaction process.
Defining confidentiality agreements
A confidentiality agreement outlines the obligations of both parties regarding confidential information. This information can include financial records, customer lists, trade secrets and any other data that gives the business a competitive edge. Without a confidentiality agreement, there is a risk that someone can misuse sensitive information. There is also the possibility of leaks or information sharing with your competitors.
Protecting trade secrets
One of the primary reasons for using a confidentiality agreement is the protection of trade secrets. Utah law defines a trade secret as information that derives economic value from not being generally known. Business owners must also make efforts to maintain the information’s secrecy for it to be a “trade secret.” If a potential buyer gains access to trade secrets without a confidentiality agreement in place, you may lose the ability to safeguard that information.
Putting safeguards in place
Confidentiality agreements also often include provisions that require the return or destruction of confidential information if a sale does not go through. This guarantees that your sensitive information does not remain in the hands of a party that no longer has a legitimate reason to possess it.
Even if you are selling a business, the information associated with that sale might relate to your personal life or future business ventures. A confidentiality agreement protects you from unexpected risks. Secure a confidentiality agreement early in the negotiation process to protect your business’s most valuable assets.