Protecting Confidentiality in the Sale of Your Business

An asset purchase agreement crossed my desk recently with a provision that allowed the buyer to post a notice on the door that there was a pending transfer of the business.   Also included in buyer’s proposed purchase agreement was a provision obligating seller to maintain all customers, vendors, and employees against that threat that the buyer could terminate the contract.

Upon review, it appeared that the buyer was setting the seller up to force the seller out of business so that buyer did not actually have to pay any money to eliminate its competitor. It is critically important that confidentiality be maintained during the pendency of the transaction.  There are many ways to do this:

  • Prior to discussions on the drafting of the transaction documents, execute a non-disclosure, confidentiality, and non-circumvention agreement;
  • Set rules on the buyer’s visitations to the business, as it will become clear to employees that something is up if the same “suits” walk in weekly/monthly; and
  • Consider setting up separate email accounts and fax accounts for the transmission of confidential documents between your team (lawyer, accountant, and financial planner) and you as the principal seller of the business.

By Guest Blogger  Mary Drury, Esq.


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