Confidentiality Agreements (NDAs) When Selling a Small Business in Canada

Before you hand a buyer your numbers, your lease or your staff list, it's common to ask them to sign a confidentiality agreement. Here's what it does, what it usually covers, and when to use it.

What a confidentiality agreement does

A confidentiality agreement, often called a non-disclosure agreement or NDA, is a short contract between you and a possible buyer. The buyer agrees to use the information you share only to decide whether to buy your business, and not to pass it on to anyone else except the advisors helping them with the decision.

It matters most for small businesses because the people most interested in your numbers are often nearby: a competitor, a supplier, or a staff member's friend. It also protects something simple but important: the fact that you're thinking of selling at all.

What it usually covers

• What counts as confidential: financial statements, tax returns, the lease, contracts, staff and customer information, and anything you say in meetings.
• How the information can be used: only to evaluate the purchase.
• Who the buyer can share it with: usually their lawyer, accountant and lender, on a need-to-know basis, who must keep it confidential too.
• Keeping the sale itself quiet: the buyer won't tell anyone that the business is for sale or that you're talking.
• No contact without permission: the buyer won't approach your staff, customers, suppliers or landlord about the sale unless you agree.
• Returning or deleting information: if talks end, the buyer returns or destroys what you shared.
• How long it lasts: often one to three years, sometimes longer for customer information.

Some sellers also add a clause that the buyer won't hire away staff or approach customers for a period if the deal doesn't happen. Your lawyer can tell you whether that's worth including.

When to ask a buyer to sign

1. First contact: share only a short summary that doesn't identify the business: type of business, general area, rough sales range and asking price. No NDA needed yet.
2. Serious interest: once a buyer has asked sensible questions and shown they can pay, ask them to sign the NDA before you send financial statements or name the business. See how to weed out buyers.
3. Letter of intent: the letter of intent often repeats or extends the confidentiality terms. See what is a letter of intent?
4. Due diligence: the buyer's lawyer and accountant review the full file under the same agreement. Our documents checklist shows what's usually shared at each stage.

Practical habits that help

• Keep a simple log of who signed, when, and what you sent them.
• Share documents in stages, not all at once, and keep the most sensitive items (customer names, staff names, supplier terms) until a deal is close.
• Black out personal details such as home addresses and social insurance numbers before sharing anything.
• Meet buyers away from the business, or after hours, if staff don't know about the sale yet. See what to tell your staff when you're selling.
• Remember that an NDA helps, but it isn't a guarantee. Sharing less, later, is still the best protection.

A note on legal advice

This guide is general information, not legal advice. Confidentiality agreements are short, but the wording matters. Have your lawyer prepare or review yours, especially if you're selling to a competitor or someone already in your industry.

For the wider plan, see how to sell your business without a broker and how to prepare your business for sale.