Confidentiality—asset purchase
Confidentiality—asset purchase

The following Corporate guidance note provides comprehensive and up to date legal information covering:

  • Confidentiality—asset purchase
  • Introduction
  • Terms of the confidentiality agreement
  • Practical steps for the seller
  • Remedies for breach

Introduction

The following provides an overview of confidentiality agreements in the context of the acquisition of the assets of a business (the business).

A confidentiality or ‘non-disclosure’ agreement will usually be signed early on in the transaction. Confidentiality provisions may be contained in a separate agreement or may be included in heads of terms. A separate confidentiality agreement is more common than incorporating such provisions into heads of terms.

Purpose of a confidentiality agreement

In an asset purchase transaction, the seller will disclose to the buyer sensitive information about it and the business to enable it to conduct its due diligence. The seller’s main concern will be that such information is kept secret and is protected from unwanted disclosure or misuse by the buyer (who may be a competitor) or other persons to whom such information is disclosed.

Common law protection

The common law provides the seller with a certain degree of protection. Where the seller informs the buyer or the buyer ought reasonably to know from the circumstances that the information is of a confidential nature (there being no specific definition of confidential information), the buyer will be under a duty not to disclose or use the information in an unauthorised manner. Protected information can be oral or written. Information will not be confidential if it is common knowledge or already