In the dynamic world of corporate transactions, you want to ensure that you have taken all necessary prior steps to ensuring a smooth and successful process. We’ve been diving into some interesting corporate deals lately, so I thought I’d share a few pearls of data protection and privacy wisdom for anyone thinking about selling their business in the future. Trust me, you will thank your pragmatic self when the time comes.
1. Data Protection Requirements
One of the first steps in preparing your business for sale is to address data protection requirements. In modern share purchase documentation, it is standard for numerous data protection and privacy compliance warranties to appear. You can assist your future-self by taking pro-active steps in this regard. This involves ensuring that you have the necessary policies, procedures, and notices; as well as appropriate data processing/sharing agreements.
You could also take the following steps:
- Data Minimisation: Have easily redactable sets of documents or records that are likely to be shared with prospective buyers, such as employee role and renumeration lists. They aren’t likely to be interested in staff member names, addresses or date of birth, but sellers may inadvertently disclose this information as it appears on records or documents that are of interest to the buyer. Creating redactable/amendable records and documentation will save you time in the long-run.
- Employee Data Notices: Inform your employees that their personal data may be disclosed, where necessary, to prospective buyers during the sale process and identify the appropriate lawful basis for this disclosure. This transparency is crucial to maintain trust and compliance.
- Non-Disclosure Agreements (NDAs): In addition to protecting personal data, secure suitable NDAs to protect confidential information during negotiations. This prevents accidental disclosure of sensitive data to prospective buyers.
2. Organise Supplier Contracts
Maintaining an organised record of your supplier contracts is vital. This includes any data sharing and processing agreements. Here’s why:
- Centralised Storage: Keeping all contracts in a central, easily accessible location saves time and reduces stress when documents are needed quickly such as identification of data flows/locations where a data breach occurs.
- Readiness for Due Diligence: Having these documents readily available ensures you are prepared for the due diligence process, which can be rigorous and time-sensitive. You may be asked to disclose full copies and so you want to avoid a last minute scramble for information requested.
3. Intellectual Property Ownership
Understanding the ownership of your intellectual property (IP) is critical and clarifying IP ownership can prevent potential issues that could affect your business’s value and avoid remedial actions later. “We have no IP” is something we hear repeatedly but, in most cases, this is inaccurate. IP does not have to be complex patents or a portfolio of registered trademarks. It could be your website, logo or mailing list. We recommend you take the following actions early:
- Ownership Verification: Determine if you have full ownership or just a licence to use an asset. If a third party or a former director created them, you might not own them outright.
- Licence restrictions: Where you use an asset under a licence, review that licence to check if your use of the asset is in compliance with its restrictions. Common areas of non-compliance in this regard include unauthorised credentials (such as login) sharing or licence sharing within a corporate group.
4. Information Commissioner Registration
This is a common, but easily rectifiable, area of non-compliance. Most businesses will be required to register with the Information Commissioner and ensure that your registration with the Information Commissioner is up to date and appropriate for your business activities at all time. Ensure compliance by reviewing and, where required, updating your registration annually. Don’t just renew without scrutinising the thresholds.
5. Centralise Policies and Procedures
You will likely be asked for copies of all policies and procedures relating to data practices. The follow steps can help you with such a request:
- Avoid Fragmentation: If policies are scattered across multiple systems or locations, it’s easy to lose track. Centralisation helps in maintaining a clear overview and ensures nothing is overlooked.
- Label Correctly: When referencing documents, it is best to give them an appropriate title and document reference that helps with their instant recognition. Due diligence exercises can take longer where documents are not immediately and easily apparent.
6. Realistic Deadlines
We know and expect deadlines, but they are often misused which causes unnecessary stress and anxiety for the parties. Consider the following when setting a deadline:
- Realistic: While it’s important to meet deadlines, setting unrealistic ones can lead to unnecessary stress and errors. You must give each stage of the process the time to be done properly.
- Critical Milestones: If you set something as critical, make sure that this is truly the case. Critical deadlines take attentions away from other priorities so they must be sparingly to protect capacity and quality.
- Communicate Early: If all parties are on the same page, they know what to expect and there are no nasty surprises. It is important that all key figures in a transaction – the Buyer, Sellers, Lawyers, Accountants etc – are all aware of the preferred timescales for the transaction.
Preparing Your Business for Sale – Conclusion
Selling a business is a complex process that requires careful planning and attention to detail. By addressing these key areas, you can ensure a smoother and more successful transaction. Preparing early and thoroughly will not only enhance the value of your business but also make the sale process more efficient and less stressful.