Confidentiality agreements (also called nondisclosure agreements, confidential disclosure agreements, and secrecy agreements) are contracts that govern the disclosure of confidential information by one party (the disclosing party) to another party (the receiving party). Confidential information is exchanged for a promise of secrecy. The disclosure may be unilateral, bilateral or multilateral. Confidential information disclosed in a confidentiality agreement might pertain to Intellectual Property and information of the seller.
The confidential information has value precisely due to the fact that is known to only a few, that is, open disclosure will be injurious to this value. Disclosure of this information is often totally against the owners’ interests. The owner may be that their customers, suppliers and staff are not aware that a sale is contemplated until much later in the process. The owner also needs to be assured that any prospective buyer has the background experience, skills, and financial resources to successfully buy and run the company.
Safeguarding confidentiality is a major issue for business brokers. A confidentiality agreement can either stand alone or be included as part of a broader agreement. An appropriately drafted confidentiality agreement should contain a list of standard provisions and exceptions. In special cases, where the disclosing party wishes to carefully protect the confidential information, the agreement might also include extra strong clauses and articulated security provisions.