Non-Disclosure Agreements

What is a Non-Disclosure Agreement?

A Non-Disclosure Agreement (NDA) is a legally binding company contract between your company and employees, stakeholders, or third-parties, restricting the disclosure of confidential information, for a specified time.

An NDA, also known as a confidentiality agreement, outlines the terms and conditions that prohibit the disclosure of sensitive information shared by your company with its employees, stakeholders, or third-parties, for a defined period.

An NDA is often used to protect intellectual property rights such as databases, client lists, proprietary information and sensitive business-related information of a company.

NDAs can be classified into three types:

• Unilateral or One-way: Involves two parties with one party agreeing not to disclose the confidential information of the other party
• Bilateral or Two-way: Involves two parties with both parties agreeing not to disclose each other’s confidential information
• Multilateral: Involves three, or more parties with two, or more parties agreeing not to disclose the confidential information of the other party/parties

Why is an NDA Important for Business Today?

An NDA enables your company to:

• Safeguard interests by preventing the disclosure of confidential information to your competitors or the general public
• Assess information which cannot be disclosed
• Detail the legal consequences of disclosing confidential information

Why is an NDA Important for an Event Tomorrow?

An NDA is important for an event tomorrow, as it helps:

• Restrict potential investors from disclosing any information obtained during the transaction process, particularly for parties that do not ultimately become investors
• Understand any confidentiality obligations the business may currently be under
• Understand what other parties outside of a proposed transaction may be subject to non-disclosure obligations

Pros of Addressing NDAs

• Protection of trade secrets and business processes enabling competitive advantage
• Prevention of theft or misuse of your company’s information or intellectual property
• Protection from any potential financial loss due to illegal disclosure of information
• Trust building between parties by preventing the disclosure of confidential information
• Enable due diligence to be carried out by restricting the disclosure of the information provided

Cons of Not Addressing NDAs

• Threat to business growth due to disclosure of confidential documents, or information to your competitors
• In ability to allow due diligence to be carried out unless it is done without any obligation to honour the confidentiality of the information.