During company merger and acquisition transactions, it has become customary for those involved in such transactions to ask potential buyers for a confidentiality agreement so that, should these latter breach the secrecy obligation, it will be easier to entail their contractual liability.


Indeed, the negotiation stage between the seller and the potential buyer will involve the transfer of lots of information (accounting, technical, commercial, financial, legal etc.) concerning the company sold. It is often the case that this confidentiality agreement includes – in addition to the obligation to not disclose information about the company to be sold – the obligation to not even disclose the name of this company.
Therefore, the confidentiality agreements shall primarily include a so-called non-disclosure obligation.


A non-disclosure obligation


The non-disclosure or secrecy obligation is the main obligation of this type of agreement. It concerns all the information relating to the company to be sold or its background, referred to as confidential information, sent to the potential buyer or even obtained by it during the negotiation and transaction procedure. Any document exchanged between the seller and the potential buyer bearing, for example, the notation “confidential document” or “confidential information” as stipulated by the confidentiality agreement shall therefore come under this non-disclosure obligation.


Confidential information does not only concern information sent in writing. Information transferred orally, visually or otherwise falls within the scope of this agreement. Likewise, the method of transferring the information subject to the non-disclosure obligation may be direct (by the seller himself) or indirect (through the intermediary of advisors, bankers etc.).


Therefore, the non-disclosure obligation consists, for the potential buyer, in refraining from stating to third parties to the transaction the transaction procedure undertaken or the negotiations, and from disclosing and reproducing the information obtained.


Of course, some information is by nature not confidential. This includes freely accessible information as stipulated by the law (Private Limited Company (SARL) articles of association, annual accounts etc.) or information which is in the public domain, i.e. which is known by “everyone”. Furthermore, the confidentiality agreement may stipulate that information of which the potential buyer already had knowledge beforehand (manufacturing method etc.) shall be removed from this non-disclosure obligation. Finally, the agreement may stipulate that confidential information may be sent to the advisors of the potential buyer (for financial or legal analysis etc.) provided that these latter sign a confidentiality agreement in the same form or that they are ethically bound by secrecy (as a lawyer is, for example).


Moreover, it is customary to add to this non-disclosure obligation so-called non-use obligations such as a restriction in the use of the information transferred.

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