Share This Info:  

What Info Should Be Included In A Non Disclosure Agreement?

See All Discussions   •   See All Contributors   •   All New Discussions & Comments

Comments & Replies: 8     Views: 3003     Posted By: Timothy Cunha JD  Timothy Cunha JD: Business Broker, SF Bay Area

Just had a discussion with a owner/seller about non-disclosure agreements and confidentiality agreements when selling a business. Here was her question: "I am selling my business and I have heard I should have potential buyers sign a NDA. What items of information should I have on my NDA?"

Topics: Buying A Business, Legal Issues, Non Disclosure Agreements, Selling A Business     Tags: non disclosures, selling a business



You’re right about the necessity of having any interested buyers sign a NDA (Non Disclosure Agreement). That is their promise not to discuss with anyone any of the information they learn about your business, including the fact that it is for sale. Most NDA's are one page and should include the statement that the buyer prospect understands he or she may be financially liable to you for violating the agreement.

I do recommend getting a buyer profile from the buyer. It is not something you would include. The profile lists the interested person’s name, contact information, businesses and geographical area of interest, a statement about the buyer’s amount ofi cash and other assets that can be sold to provide more buyer funds, or can be used as security for a loan. Finally, the prospective buyer’s profile should include a a paragraph or so summarizing his/her business experience.

When setting up a meeting with a prospect, let him or her know what you expect to be provided and what you will provide to the prospect in the way of information about the business. There is no excuse, then, for a buyer to neglect to bring the information you want as he or she was notified ahead of time you will not talk about the business without knowing if the individual is qualified to buy it, if interested in doing so.

Contributor: Business Appraisals, Valuations Advisor

The easiest way for me to answer this question is to provide a copy of an NDA I used for years. the seller should not disclose the name of his business or give out any information on his business until he gets the agreement signed as its possible he may be talking with a competitor. See my NDA info/text below:

This document represents an agreement of confidentiality between Seller, and _______________________________________.

The undersigned agrees that any information provided by the Seller, will be used solely for purposes pursuant to acquisition of the company (name of business to be disclosed after completion of this agreement).

The undersigned further agrees to hold all confidential or proprietary information or trade secrets, including knowledge of sale of this company, in trust and confidence and agrees that it shall be used only for the contemplated purpose, shall not be used for any other purpose.

The disclosed information shall not be disclosed to any employee, consultant or third party unless said party agrees to execute and be bound by the terms of this agreement.

It is understood that the undersigned shall have no obligation to hold confidential with respect to any information known by the undersigned or generally known within the industry prior to date of this agreement, or shall become common knowledge within the industry thereafter as said information shall not be deemed protected under this agreement.

Upon demand by the Seller, all information, including written notes, shall be returned.


Keeping the sale confidential is essential for preserving the value of the business for both the seller and the eventual buyer. Before providing a prospect with even the name and location of the business, you should have them sign a comprehensive and strict confidentiality or non-disclosure agreement (“NDA”).

The NDA should clearly define the information and data that is confidential, set limitations on just who on the prospect's side can see it (e.g., lawyer, accountant), make the prospect liable for any breach by the prospect or any of his professional advisors, require the prospect to return all copies of information and data if the deal doesn’t go through, prohibit the disclosure of any confidential information unless it otherwise becomes publicly available, and prohibit the prospect from using the confidential information in any way (e.g., soliciting customers, hiring away employees, using a proprietary process, etc.). You also want to get some basic financial information from the prospect, so some sort of buyer profile is appropriate.

If you are using a business broker (which I strongly recommend), the broker can obtain the NDA and profile before the buyer even learns the identity of the business. Of course, this is impossible if you are selling your own business.

For an example of a comprehensive, strict, effective NDA, that includes a buyer profile see a copy of my NDA text below:

1. TIMOTHY CUNHA, BRE # 01919755 [TRANSWORLD® BUSINESS ADVISORS of PALO ALTO] (hereinafter referred to as “Broker”) is the business transaction intermediary acting on behalf of the Seller and will be compensated by Seller in accordance with a contract signed by the Seller and Broker or by the Seller and another broker (if applicable) cooperating with Broker; Prospect agrees not to circumvent said contract. Any rights of enforcement, compensation, and damages granted herein to the Broker are also granted to a cooperating/listing broker, if any. Seller and Broker (and the cooperating/listing broker, if any) are the beneficiaries of this unilateral contract.

2. Business(es) Covered – Prospect understands that the terms “Seller,” “Company,” “Business,” and “Listing” refer to each and every respective seller, company, business, and/or listing introduced by, revealed by, and/or disclosed by Broker to the Prospect, and this Agreement covers each and every such seller, company, business, and listing, and their respective Confidential Information. The respective “Effective Date” of this Agreement for each such seller, company, business, and listing, shall be the date on which each respective seller, company, business, and listing was introduced to, revealed by, and/or disclosed by Broker to the Prospect.

3. Confidential Information - Prospect understands that the seller of the business (“Seller”) and also the business set forth in the Listing (the “Business”) shall, directly or indirectly through Broker as its conduit, disclose to Prospect certain confidential and proprietary information related to the Business (“Confidential Information”), which shall include information relating to non-public, confidential, and/or proprietary operations, properties, personnel, financial information, materials, products, technology, computer programs, manuals, business plans, software, marketing plans, and other information disclosed or submitted, orally, in writing, or by any other media solely relating to Prospect’s interest in purchasing the Business. Prospect agrees not to disclose, publish, or otherwise reveal any of the Confidential Information to any other parties, agents, representatives, or employees whatsoever nor to use Confidential Information to the detriment of Seller, without the prior written consent of Seller, except that Prospect may disclose the Confidential Information to Prospect’s legal counsel, accountant, or lender, subject to the same provisions of confidentiality contained herein.

4. Conduct - Prospect understands and agrees that all communications concerning the Business shall be conducted solely through the Broker, and Prospect agrees not to approach or contact Seller or its principals or visit the physical Business location without an appointment arranged through Broker. Prospect also agrees not to contact or approach Seller’s employees, officials, agents, customers, suppliers, and/or competitors without the prior written consent of Seller. Prospect shall be liable to Broker for any and all damages Broker may suffer, including but not limited to Broker’s full commission as set forth in a separate agreement with Seller if (a) Prospect buys, leases, receives in trade, or otherwise obtains any part of the Business during the two (2) year period commencing from the Effective Date; (b) Seller and Prospect enter into a contract for sale; (c) Prospect, through no fault of Seller, fails or refuses to complete a sale, lease, trade or other disposition of the Business after entering into an agreement to do so; or (d) Prospect does any act equivalent of a purchase, or has an employment, independent contractor, or consulting relationship directly or indirectly with Seller. Prospect shall be fully responsible for any breach of this Agreement by Prospect, Prospect’s agents, representatives, or employees.

5. Information – All information and documents provided to Prospect concerning the Business is the property of Seller and must be returned immediately upon written request by Broker or Seller. Any and all representations and warranties shall be made solely by and between Seller and Prospect in a signed purchase/sale agreement and subject to the provisions thereof. Prospect fully understands that Broker makes no representations or warranties whatsoever, expressed or implied, to Prospect with respect to the Business and Confidential Information disclosed to Prospect. Prospect acknowledges that it does and will not rely upon any information, written or oral, furnished by Broker. Prospect understands that all information received must be independently verified by Prospect. Prospect acknowledges that all information furnished and/or received by Prospect is provided by Seller and not verified in any way by Broker or its agents, and that Broker and its agents are relying upon Seller for the accuracy and completeness of the information. Prospect agrees that any information and documents received by Prospect will not be used in any way to Seller’s or Broker’s detriment or liability, and Prospect agrees to indemnify and hold Broker harmless from any claims or damages from its use and/or reliance thereon. The provisions in this paragraph shall also inure to the benefit of Broker’s agents.

6. Seller & Broker as Beneficiaries – Prospect acknowledges that Seller has the right to protect the Confidential Information and to obtain the benefits hereunder. and that Broker (and a cooperating/listing broker, if any) has the right to protect its interests and to obtain the benefits hereunder. Accordingly, Seller shall be considered an intended beneficiary hereunder. The fact that Seller, Broker, and a cooperating/listing broker (if any) is not a signatory to this Agreement shall not prohibit, alter, or limit Seller’s, Broker’s, or a cooperating/listing broker’s right to enforce the terms hereof.

7. Representation – Prospect understands and agrees that Broker is an agent of the Seller. As such, Broker is not an agent or representative of Prospect. (The nature, extent, and scope of Broker’s agency relationship with Seller and Prospect may be more fully defined in an Agency Disclosure Document, as appropriate.)

8. Advice - Prospect understands, agrees, and acknowledges that Prospect has been advised to consult an attorney and/or certified public accountant for assistance in reviewing and verifying the legal, financial, and/or any other pertinent information concerning the Business. Prospect understands and agrees that Broker is merely acting as a conduit of information and has not made any independent investigation of the accuracy of the information provided by Seller. Prospect agrees independently to verify all representations and warranties made by Seller and understands that Broker has not made nor will it make any verification or warranty regarding any information provided. Broker provides no legal, accounting, or tax advice.

9. Procuring Cause - Prospect hereby recognizes Broker as the procuring cause of any purchase or other act set forth in paragraph 2 above, and agrees for a period of two (2) years from the Effective Date not to deal directly or indirectly with the Seller, its agents, representatives, or assigns, without the prior written consent of Broker. If Prospect, or an entity in which Prospect has an interest, or person or entity introduced to the Business and/or Seller by Prospect, enters into a sale and/or purchase agreement, a management contract, or other financial arrangement with Seller with respect to the Business or part thereof, including leasing the Business premises from Seller or Seller’s landlord, Prospect shall be liable to Broker for any and all damages Broker may suffer, including but not limited to the payment of the full commission due Broker under a separate agreement with Seller. To ensure the collection of its compensation, Prospect hereby grants Broker the right to place a lien on the Business assets which may be acquired by Prospect in violation of this Agreement, and Prospect agrees and does hereby appoint Broker its attorney-in-fact to execute all documents necessary to perfect such lien, and this Agreement shall be Prospect’s consent to do so as required by any and all applicable statutes and laws.

10. Warrantees - Prospect warrants that the sole purpose of requesting and receiving information on the Business is to possibly affect a purchase, merger, and/or acquisition, and none other, and Prospect knows that Seller and Broker are relying upon such representations in disclosing the Confidential Information to Prospect. Prospect further warrants that it is financially capable of purchasing the Business, has not filed for an undisclosed bankruptcy, and has not been convicted of any felony or crime.

11. No Implied Waiver - Either party’s failure to insist in any one or more instances upon strict performance by the other party of any of the terms of this Agreement shall not be construed as a waiver of any continuing or subsequent failure to perform or delay in performance of any term hereof.

12. Consent & Jurisdiction - This Agreement shall be governed by and construed in accordance with the laws of the State of California, and the parties consent and agree that Santa Clara County shall be the sole and exclusive venue for all proceedings relating to this Agreement and/or its subject matter, including without limitation the enforcement hereof. Prospect hereby waives all objections to establishing venue elsewhere. Prospect agrees that in the event of any breach or threatened breach of the confidentiality provisions contained herein, Seller or Broker may obtain, in addition to any other legal remedies which may be available, such equitable relief as may be necessary to protect Broker and/or Seller against any such breach or threatened breach.

13. Attorney’s Fees - In the event of any dispute or litigation arising out of or relating to this Agreement, the prevailing party shall be entitled to an award of its reasonable attorney’s fees, costs, and expenses incurred in both the trial court and appellate levels.

14. Copies – Prospect has received a copy of this Agreement, and a fax or electronically transmitted copy with signatures shall be considered as an original.

15. BUYER PROFILE: Our agreements with Sellers require that we obtain evidence of financial ability before disclosing the name and location of the business.

To identify your wants and better serve your needs, Transworld evaluates all prospective buyers. Please complete this form and return it either by fax or as a scan attachment to an email. Your information will be held in strict confidence and there is no obligation. [FORM & FNANCIAL STATEMENT FOLLOW]

Buyer represents that all data provided herein is true to the best of his/her/their respective knowledge.

Contributor: Business Broker, SF Bay Area

Business Brokers who are members of the California Association of Business Brokers use a confidentiality agreement form designed by their association. You will need to consult with an attorney to have him/her prepare the confidentiality agreement for you. Since Brokers are not attorneys or CPA they can’t provide advice on this. If you prepare an ad-hoc form as confidentiality agreement then it may or may not be enforceable if it is not appropriately drafted.


Non-disclosure agreement is a legally enforceable contract that creates a confidential relationship between a seller and a buyer. By signing an NDA, buyer/s promise to not divulge or release information shared with them by the seller. If the information is leaked, the injured person can claim breach of contract. Contact your local business to obtain a copy of their NDA and a buyer profile.


An NDA stands for Non Disclosure Agreement- same thing as a Confidentiality Agreement. I have a form I use. Most important items are as follows:

Don't disturb the employees.

Don't disclose the sale to anyone.

Don't disclose any financial information except to your professional advisors.

Explain why it is important and if breached it could harm you and your business. You may want financial information returned if deal does not go through.

My form is one page.


The NDA aims to protect the seller's confidentiality by expressing that the potential buyer is not to disclose important information about the business, but it also protects the broker's commission. The NDA should explain what the monetary penalty should be for a buyer to acquire the business by bypassing the broker. A standard fee for a person who goes behind the broker's back and takes ownership of the business could be either $10,000 or 10% of the purchase price, whichever is greater, obviously this could be changed to whatever the broker wants to put in the language of the NDA. The broker should also file and keep track of NDAs after the listing contract is over, because there are times when someone will fill out an NDA and then the seller and buyer will wait out the listing contract, especially if it is nearing to a close, and purchase the business. The NDA should have some language which states that the person filling out the NDA cannot purchase the business without the broker for a certain number of months after the NDA is signed.


  Helpful Resources To Assist In Selling And Buying California Businesses
Diane Boudreau-Tschetter: Escrow And Bulk Sale Services

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.

Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services

Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 800-864-0420.

Brad Steinberg, Broker - Laundromat Specialists

Laundry specialists - founded in 1968 by three laundry professionals, PWS is a family-owned corporation. Through the years it has grown to become the largest vended laundry equipment distributor in the United States. Call Brad Steinberg at 323-721-8832 to sell or buy a coin or card laundromat.

Elizabeth McGovern: Escrow Services - SF Bay Area

McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.

Helen Yoo: Escrow & Bulk Sale Services - Southern California

New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.

Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area

Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.

Mark Chatow, Esq.: Legal Services For Buying, Selling Businesses

Mark has a broad range of small business purchase & sale experience from analyzing potential acquisition targets to successfully guiding buyers and sellers through the purchase & sale of small businesses. Mark can assist with contracts, negotiations, legal matters, etc. Reach Mark at 949-478-8393.


  Related Articles, Events, Blog Posts, Discussions, Videos, Interviews
Sellers Ask: How Long Should I Wait For The Buyer To Do Their Due Diligence?

Business sellers & buyers ask the question in the buying process-how long should I ask for due-diligence when buying a small business? The answer really depends on several factors. They include: type of business, demand for the business, complexity of the business. Advisors weigh in on this topic.

Thinking Of Selling My Business: What Factors Create Value And Drive Price?

There are a lot of misconceptions about what enhances the value of a business. The following factors in this Discussion Post on BizBen are aspects of a business that really drives its value and pricing. Business owners thinking of selling should check these out these factors before selling.

5 Myths About Selling A California Business: Best Tips For Sellers & Brokers

Peter Siegel, MBA (at 866-270-6278) - BizBen Director discusses myths associated with the process of selling a business and some of them can actually cause deals to fall through. Don't let your sale be comprised, be aware of these common misconceptions related to the process of selling a business.

How Many Months Should I List My Business With A Business Broker?

It's important to remember that selling a business takes time. Unlike selling a house, which can be sold relatively fast, a business can take up to six months to a year to sell. Joe Ranieri (Orange County Business Broker) at 714-292-5448 explores this topic from a Business Brokers perspective.

Find Out Why 80% Of California Business Buyers Never Find And Buy A Business

First the dreaded statistic: 80% of all California business buyers looking to buy a small to mid-sized business in California never end up doing so! Peter Siegel, MBA BizBen Founder And Director at 866-270-6278 covers successful tactics all business buyers of small businesses should utilize.

Tips When Using Escrow Bulk Sale Services When Buying Or Selling A Business

The final part of the business for sale transaction is the escrow and bulk sale process by Peter Siegel, MBA (Business Purchase Financing Expert, ProBuy & ProSell Program Advisor) answers questions and describes the escrow and bulk sale process. Peter can be reached direct at 866-270-6278.

Selling A Business Without Getting Sued: 5 Tips For Business Sellers/Brokers

How do I sell my business without getting sued, isn't a subject just for discussions with lawyers. A seller can take some precautions to reduce potential legal problems. Peter Siegel, MBA Founder Of BizBen and BizBen's ProSell Program discusses this topic for business owners/sellers and brokers.

Selling Your Business To One Of Your Employees - A Good Idea? Pros And Con

After investing years of time and talent into a company, many small business owners want to feel like they are leaving their business in good hands and for that reason, some sellers opt to sell their business to an employee. Peter Siegel, MBA talks about the pros and cons to taking this route.

See All News, Tips And Events

Joe Ranieri Orange County Business Broker
Prabhjot Randhawa Business Broker SF Bay Area
Southern California Legal Services For Buyers And Sellers
Willard Michlin Due Diligence Services
Facebook
Twitter
Linkedin
Google Plus You Tube
Vlogs and Podcasts


Auto Related
Business Services
Children Related
Communication Related
Computer, Internet Related
Construction Related
Entertainment Related
Financial Services
Health, Beauty Related
Home Improvement Related
Maintenance Related
Manufacturing Related
Media, Publishing Related
Pet Related
Photography/Video Related
Real Estate Services
Restaurant, Food Related
Retail Related
Service Related
Sports Related
Transportation Related
Travel Related
Wholesale Related

Auto Body Shops
Auto Repair Shops
Bakeries
Bars, Sports Bars
Cafe Restaurants
Car Washes
Cleaning Services
Clothing, Apparel Stores
Coffee Shops
Convenience Stores
Deli Restaurants
Discount, Dollar Stores
Dry Cleaners
eCommerce Websites
Fast Food Restaurants
Florists, Flower Shops
Full Service Restaurants
Gas Stations
Gift Shops
Gyms, Fitness Facilities
Home Health Agencies
Hotels/Motels
Ice Cream Shops
Juice, Smoothie Shops
Laundromats
Liquor Stores
Markets, Marts
Nightclubs
Pizza Restaurants
Postal, Shipping Stores
Preschools, Day Care
Print Shops
Salons, Beauty Shops
Sandwich Shops
Smog Test Only Shops
Smoke Shops
Spas, Med Spas
Sushi Restaurants
Tire Shops
Towing Services
Vending Routes
Wireless, Cellular Shops
Yogurt Shops

Alameda
Alpine
Amador
Butte
Calaveras
Colusa
Contra Costa
Del Norte
El Dorado
Fresno
Glenn
Humboldt
Imperial
Inyo
Kern
Kings
Lake
Lassen
Los Angeles
Madera
Marin
Mariposa
Mendocino
Merced
Modoc
Mono
Monterey
Napa
Nevada
Orange
Placer
Plumas
Riverside
Sacramento
San Benito
San Bernardino
San Diego
San Francisco
San Joaquin
San Luis Obis
San Mateo
Santa Barbara
Santa Clara
Santa Cruz
Shasta
Sierra
Siskiyou
Solano
Sonoma
Stanislaus
Sutter
Tehama
Trinity
Tulare
Tuolumne
Ventura
Yolo
Yuba

0 to $99,999
$100,000 to $249,999
$250,000 to $499,999
$500,000 to $999,999
$1 million to $2 million
over $2 million




BizBen - Where California Deals Get Done! 888-212-4747
7172 Regional Street #364 · Dublin, CA. 94568
BizBen · Copyright © 1994 - 2018, All Rights Reserved

               Vlogs and Podcasts  
Join Us On Social Media - Content Updated Daily
Sign Up Today - For Our FREE BizBen Weekly Email Newsletter
Includes The Best Info On Buying, Selling, Valuing, Financing California Businesses:
Articles, Blog Posts, Podcasts, Videos/Vlogs, Discussions, Q&A, Workshops, Webinars,
Resources. Watch For An Email Confirmation After Signing Up Above. Thank you.
Clost Login


Please confirm your registration by clicking the link we've sent to .

If you can't see it, please check your junk mail folder.

If you have any problems registering, or need assistance with your new BizBen User Account please phone BizBen Customer Support at 888-212-4747.



First Name:*
Last Name:*
Email Address:*
Confirm Email:*
Create Password:*
Confirm Password:*
Phone:
(   
 


You Are A:
Individual
 
Intermediary
 

Email Address:
Password:
 
Search BizBen.com

500 New & Refreshed Detailed Postings Daily
Over 2500 Resources Available On BizBen
Since 1994. Where California Deals Get Done!
Financing Advice: Showing Add Backs To Get Business Acquisition Financin...
Read More News
I am Buying A Business: Should I Buy The Property As Well? A Good Decisi...
Read More News