When Should You Use a Non-Disclosure Agreement?

Confidentiality Agreements or Non-Disclosure Agreements (NDA’s) are used to protect your confidential information. They are an essential part of best practice and should be a part of your business strategy, internally and externally when working with suppliers, partners, investors etc.

Of course, the best way to keep something confidential is not to disclose it in the first place! However, realistically, in order to grow your business, you will need to, or want to discuss your strategy with certain people. This is when an NDA will protect you.

There are a few essential elements of an NDA:

You need to be clear about the purpose of the NDA. What information do you want protected by the agreement and why?

How long do you want the period of confidentiality to last? Some information such as customer lists should ideally be protected forever.

You should detail those people who can access the confidential information, subject to the terms of the NDA. This should be on a need-to-know basis and is likely to include key personnel and managers but also third parties who would also need to sign up to similar terms of confidentiality.

If you only want to protect your information, then a one-way NDA is sufficient. However, mutual NDAs where both parties to the agreement can disclose their confidential information to each other are far more common.

Information that cannot be protected

Non-Disclosure Agreements cannot protect confidential information that is already lawfully in the possession of the receiving party prior to them signing your NDA.

 

An NDA cannot protect information that is already in the public domain or information that becomes available to the receiving party on a non-confidential basis from a third-party source other than the disclosing party.

An NDA also excludes information that is required to be disclosed by any law or order of a court of competent jurisdiction; recognised stock exchange; regulatory authority; governmental department or agency – provided that prior to such disclosure the receiving party consults with the disclosing party as to the proposed form, nature and purpose of the disclosure; or any information that is approved for release by written authorisation of the disclosing party.

Know who, within your business, is signing them and why

Non-Disclosure Agreements are legally binding documents and whilst they are designed to help protect your confidential information, it is important that you know who within your organisation is signing them.

It is not unusual for companies to allow their employees to sign NDAs, but this is dangerous. You should have a formal process for these agreements that involves a lawyer or senior manager within the business.