What Is an NDA When Selling a Business in British Columbia?

Before a serious buyer will make an offer, they will want to see your financial statements, customer information, contracts, and more. Sharing that is risky, because it could harm your business if it reached competitors, staff, or customers.

A non-disclosure agreement is the usual first step. This article explains what an NDA covers, who should sign it, what to watch for, and how enforcement generally works.

This article covers the law of British Columbia.

What an NDA does

An NDA, also called a confidentiality agreement, is a contract. The buyer agrees to keep your information private and to use it only to decide whether to buy the business. It is signed before you share sensitive material.

It is a contract, not a licence or a government filing, so its strength comes from its wording. A vague or one-sided NDA may give you less protection than you think.

What it should cover

• A clear definition of confidential information, such as financial records, customer and supplier lists, pricing, contracts, and processes.
• The permitted purpose: evaluating the purchase and nothing else.
• Whether the fact that the business is for sale, and that talks are happening, is itself confidential.
• How long the duty of confidentiality lasts.
• What must happen to documents and copies if the talks end, such as return or destruction.
• Limits on contacting your employees, customers, suppliers, and landlord without your approval.
• Any exceptions, such as information that is already public or that must be disclosed by law.

Whether a clause about not hiring your staff or not approaching your customers is enforceable depends on its wording and the circumstances, so ask a lawyer about those terms.

Who should sign

Think about everyone who will actually see your information. The person or company making the offer should sign. If the buyer is a corporation, consider whether the individual owners should also sign or give a personal commitment, since a company with few assets may be hard to pursue.

A common approach is to make the buyer responsible for anyone it shares information with, and to require advisors and financiers to agree to the same terms before they receive anything. A lawyer can help set this up.

How an NDA is enforced

What an NDA gives you if confidential information leaks depends on how it is written and on your situation, so it is worth confirming with a lawyer. What you can recover, and whether a court will order someone to stop using or sharing the information, depends on the wording of the agreement, the harm, and the evidence.

Proof matters. Keep a record of what you shared, when, and with whom. Sharing information in stages, with the most sensitive details held back until a buyer is serious, reduces what is at stake if something goes wrong.

What to do next

• List what you plan to share and decide which items are most sensitive.
• Have a lawyer prepare or review the NDA before sharing any financial information.
• Decide who on the buyer's side needs to sign, including advisors and financiers.
• Keep a log of who received which documents and when.
• Release information in stages as the buyer becomes more serious.
• Remember that employees, customers, and the landlord may need to be told later; plan how and when.

Frequently asked questions