Can I pull out of selling my business before signing anything?

A sale of a business is not agreed until the parties settle terms, and an owner in early conversations may still worry about having already committed. The practical question is what, if anything, you have put your name to. If the answer is nothing, there is no signed document that obliges you to sell. If you have signed something, its wording decides what still binds you, and a lawyer should read it before you step back.

The papers that come before a sale agreement

BDC, the federal Crown corporation that lends to Canadian businesses, describes a confidentiality agreement as the document that lets a buyer see the information needed to write a letter of intent, make an offer or withdraw interest. It describes the letter of intent as a document that sets the main terms of a proposed transaction to direct and facilitate negotiation of the final terms, and says it is not intended to be fully binding unless otherwise expressly stipulated.

Clauses that can bind even when the rest does not

BDC adds that where the letter of intent so provides, it creates binding obligations on one party or the other, particularly on confidentiality and exclusivity. That means two things to look for. Check whether a confidentiality clause keeps working after talks end. An exclusivity clause, if you signed one, can stop you from negotiating with anyone else for the period it names, so stopping and then talking to a different buyer is the step to check against the paper.

What to do before you step back

• List everything you have signed or agreed in writing, including emails that say yes to a term.
• Read the confidentiality, exclusivity and cost-sharing wording, and note any end date.
• Ask whether any information you received must be returned or destroyed.
• Tell the buyer, or have your lawyer tell them, in writing that you are ending discussions.

The BDC negotiation guide describes the letter of intent as a non-binding offer that sets out the proposed price, key terms and the exclusivity period for due diligence. If you have reached that stage, read the exclusivity wording closely, including when the period ends. If you have only talked, a short, courteous written note is a sensible step, and your own lawyer can say whether anything you wrote or said could be read as a promise.