You mustn’t assume conversations with business contacts or advisors are automatically confidential.
When do you need a Non-Disclosure Agreement?
A non-disclosure agreement (NDA) is a legal contract agreeing not to disclose information you know of for a specific reason.
The NDA is applicable in various situations. NDAs are generally required when two companies enter into discussions about doing business together but need to protect the details of any potential deal. In this case, the NDA forbids all involved from releasing information regarding any business processes or plans of the other party.
An NDA may need to be signed by a new employee if he, or she, has access to sensitive information about the company.
NDAs are also commonly used before discussions between a company looking for funding or potential investors. The NDA is to prevent competitors from obtaining their trade secrets or business plans.
As a business, you may at some time have to tell people about your idea or business to get advice from:
- financial advisors
- insurance brokers
- marketing agency
What to include in a Non-Disclosure Agreement?
- The names of the parties to the agreement
- A definition of what constitutes confidential information
- Any exclusions from confidentiality
- A statement of the appropriate uses of the information to be revealed
- The time restrictions involved
- Miscellaneous provisions
A good NDA restricts the use of ideas and information to a specific permitted purpose. Specify that purpose in the NDA as precisely as possible. The permitted purpose can be widened later but not narrowed.
You should be realistic. The person you are in discussions with might need to share your information with a third party. It could be their employees or professional advisors. For this purpose, they may also need to copy private information. Ensure that these disclosures to third parties are made in confidence.