June 24, 2011
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Question
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Hi Ken,
I have a question for you with regards to NDA’s. We are a Canadian Security Company which owns a Central Station and have recently been approached with regards to selling the business.
Is there a specific NDA you would recommend for this purpose or do you currently have an NDA already developed for this purpose?
Kind Regards,
Tara
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Answer
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When you want to sell your business it's only natural that your potential buyer will want to see your business records. These records may include your employee files, subscriber files, accounts payable and receivable ledgers, business contracts with suppliers and vendors, tax returns and other documented information. These records are not something you would ordinarily share with others, especially people you may not know and likely your competitors. You should not permit such inspection without first negotiating and obtaining a non disclosure agreement.
Yes, we have such an agreement. It's not on our list of Standard Form Contracts, but you can get it by calling our contract administrator, Eileen, at 516 747 6700 extension 312.
The agreement should identify the information and documents that you and your potential buyer consider to be proprietary and confidential; otherwise certain information may not be treated as such. The agreement should specify who can review the documentation and exactly for what purpose. The agreement should specify how information is to be handled and ultimately disposed of. There should be other restrictions spelled out. Of course the non disclosure agreement is a contract, the terms of which need to be negotiated like any other contract, but if the potential buyer is interested enough you should be able to get the terms you insist on. The bottom line, the potential buyer should never be in a position to use any of the information obtained from the inspection and review, to its advantage and to your detriment.
Without giving you all of the items that should be covered, because I don't want you trying to put this important document together yourself, or giving it to your relative lawyer (or worse, accountant) to do, the agreement should prohibit the potential buyer from acquiring or buying up your debt. After buying your debt the potential buyer might be in a position to squeeze you until you are forced to sell on terms most unfavorable to you.
I am sure some of you have horror stories about potential buyers misusing the information they collected. Let's hear them.