GLOSSARY
Non-Disclosure Agreement (NDA)
Legal contract signed by a prospective buyer before receiving sensitive information about the business for sale. Protects the seller against disclosure, misuse, or unauthorized sharing of confidential information.
Definition
The non-disclosure agreement — commonly called an NDA — is the first legal document in the sale process. Every prospective buyer has to sign one before receiving the CIM (confidential information memorandum) or any sensitive information about the business.
In French-language Quebec documentation, you’ll see entente de confidentialité (NDA) used for the same concept.
Why the NDA is non-negotiable
Confidentiality is the foundation of any business sale. If the market learns that a business is for sale before the transaction closes, the consequences can be serious:
- Employees leaving out of uncertainty
- Customers turning to competitors
- Suppliers changing their terms
- Competitors exploiting the information
What the NDA covers
- Confidentiality obligation: the buyer can’t disclose that they’re in discussions or share the information they receive.
- Restricted use: the information can only be used to evaluate the acquisition, not for competitive advantage.
- Duration: generally 2 to 5 years.
- Return or destruction: if the transaction doesn’t close, the buyer must return or destroy the documents.
What every seller should know
- NEVER send financial or operational information before an NDA is signed — even to a buyer you trust.
- A broker handles this process systematically: NDA signed → anonymous profile → qualification → full CIM.
- The NDA doesn’t protect against everything — a bad-faith buyer can hardly “unlearn” what they’ve read. That’s why qualifying buyers upstream is as important as the NDA itself.