Buying a Business In Spain – Confidentiality Agreements

Buying a Business In Spain – Confidentiality Agreements

Welcome to the second article in our series on buying a Spanish business. In this series we discuss in detail all the steps involved in purchasing a business in Spain. These are:

1. Send a Letter of Intent (sometimes referred to as a non-binding Indicative Offer)
2. Sign a Confidentiality Agreement
3. Perform Due Diligence
4. Enter Negotiations
5. Sign an Acquisition Agreement (Sales and Purchase Agreement)

Buying a business in Spain is a complex process, therefore, it is best to instruct an experienced lawyer early on. In this article, we explore the significance of confidentiality agreements in the context of purchasing a business in Spain. From understanding the legal framework to outlining key provisions, we highlight the essential aspects of confidentiality agreements that buyers need to consider in order to safeguard their interests during the acquisition process.

The level of detail that needs to be disclosed by a vendor when selling a business means that ensuring confidentiality is paramount to protecting sensitive information, maintaining a competitive advantage, and preserving the integrity of the transaction. Therefore, a confidentiality agreement will include:

Are confidentiality agreements legally enforceable in Spain?

Confidentiality agreements, also known as non-disclosure agreements (NDAs), are enforceable in Spain under contract law. Spanish legislation recognises the importance of protecting confidential information and trade secrets. The Spanish Trade Secrets Act (Ley 1/2019) and the Spanish Civil Code provide legal safeguards to businesses by granting them the right to safeguard their confidential information. These laws offer protection against unauthorised use, disclosure, and misappropriation of sensitive information.

For the Spanish courts to enforce an NDA, it must be reasonable, specific regarding the information that cannot be disclosed, and not against the public interest.

What is included in a confidentiality agreement for purchasing a Spanish business?

The following needs to be included in a pre-business purchase confidentiality agreement:

• A clear definition of what constitutes confidential information. It can include a broad range of data such as financial statements, customer lists, trade secrets, business plans, marketing strategies, and intellectual property. Specifying the types of information covered in the agreement ensures that all parties have a clear understanding of what needs to be protected.
• The parties involved in the transaction. Typically, it includes the buyer and seller, as well as any agents, advisors, or legal/financial representatives involved in the due diligence process. 
• An outline of the purpose for which the confidential information is being shared. In the context of purchasing a business, it is primarily for conducting due diligence and evaluating the target company. It is important to specify that the information shared is solely for the purpose of the transaction and that any other use or disclosure is prohibited.
• The obligations of the receiving party, typically the buyer, regarding the handling of confidential information. This includes maintaining the confidentiality of the information, using it solely for the agreed-upon purpose, and refraining from disclosing or using it for personal gain. It may also include provisions regarding the return or destruction of the confidential information after the transaction is completed.
• Any exceptions to confidentiality to be included in the agreement. For instance, information that is already publicly available or becomes public through no fault of the receiving party may be exempt from confidentiality obligations. Additionally, disclosures required by law or court orders may also be exceptions. 
• The duration of confidentiality obligations. This can be for a defined period, such as during the due diligence process and negotiations, or for an extended period after the completion of the transaction. Determining the appropriate duration is crucial to protect the confidentiality of sensitive information while allowing for a reasonable timeframe for business operations and potential disputes.
• An outline of the remedies available in case of a breach. These may include injunctive relief, damages, or specific performance. Clearly defining the consequences of breaching the agreement acts as a deterrent and strengthens the enforceability of the agreement.
• The jurisdiction and choice of law that will govern any disputes arising from the agreement. It is advisable to choose Spanish law and include a provision for resolving disputes through arbitration or mediation. 
• How the confidentiality agreement will be enforced.

Final words

Confidentiality agreements play a vital role in protecting sensitive information during the process of purchasing a business in Spain. By defining private information, outlining obligations, specifying exceptions, and establishing remedies, these agreements provide a legal framework for maintaining confidentiality and safeguarding the interests of both buyers and sellers. 

Our dual-qualified, multi-lingual commercial barristers and abogadas can advise on and draft a confidentiality agreement for those wishing to purchase a business in Spain. Please contact us on +44 207 043 0648 to make an appointment.

Please note that this article does not constitute legal advice.

Let us guide you on our services for Corporate

To make a no-obligation enquiry, please either call us now on:
+44 2070 430648
or complete our online form on our contact page, which after receipt we will come back to you within 24 hours.