If you are looking to buy to sell a small business it is important to consider the often overlooked, but imperative, aspect of the protection on the businesses’ private and confidential information.
Small businesses are defined as those businesses with an annual turnover (being income from all sources, and not including assets held, capital gains or proceeds from capital sales) of $3 million or less. If the business falls within this definition, then generally it is not protected by the Privacy Act. Therefore, it is important that checks and balances are put in place so that confidential information cannot be disclosed to others. Confidential information passes between parties from the very start of the sale of business process, often before contracts are even prepared let alone signed or the sale completed. In some cases, the prospective buyer may ultimately decide not to proceed with the sale.
As such, while the contract can include a confidentiality clause to protect the small business owner during the due-diligence process, which can include passing on information about the businesses’ financial situation and key contracts, it is recommended that the proposed buyer should enter into a non-disclosure agreement with the small business owner.
__This can be a relatively straightforward two or three page document, which covers key issues such as: __
- Who the information can be disclosed to,
- The purposes they can use the information for,
- How the information will be given,
- How and when the information will be returned.
This document can be tailored to suit individual circumstances. Generally, the obligation to keep the information confidential remains in place forever (or until is ceases to be confidential information).
The contents of this article are general in nature. For advice specific to your circumstances, please contact your legal practitioner.
Hilltops News to your inbox
Sign up now for the latest news from the Hilltops Area direct to your inbox.