Businesses often need to share commercially sensitive information with employees, contractors, investors, suppliers, business partners and other third parties. A Non-Disclosure Agreement (NDA)can help protect that information by setting clear obligations around how it can be used and disclosed.

What does an NDA do?

An NDA is a contract that defines what information is confidential and sets out how the recipient can use, access and disclose that information.

Depending on the circumstances, an NDA may be one-way, where only one party is sharing confidential information, or mutual, where both parties are exchanging information.

Confidential information might include:

  • financial and pricing information;
  • customer or supplier information;
  • business plans and strategies;
  • intellectual property;
  • product concepts and inventions; or
  • information disclosed during due diligence or commercial negotiations.

When should you use one?

An NDA should generally be considered beforesensitive information is disclosed.

Common situations include negotiating the sale or purchase of a business, discussions with potential investors or business partners, engaging employees or contractors, developing a new product or invention, and entering into a joint venture or other commercial arrangement.

Putting confidentiality obligations in place early can help avoid uncertainty about what information can be used or disclosed.

What makes an NDA effective?

Simply signing an NDA does not guarantee that confidential information will remain confidential. The agreement needs to be appropriately drafted for the circumstances.

A well-drafted NDA should clearly address:

  • whatinformation is confidential;
  • whythe information may be used;
  • whocan access or receive it;
  • any relevant exceptions;
  • how longconfidentiality obligations continue; and
  • what happens to the information when the relationship or negotiations end.

The definition of confidential information is particularly important. An agreement that attempts to protect everything without clearly identifying what genuinely requires protection may create uncertainty.

The way information is handled also matters. Businesses should consider limiting access, marking documents as confidential, keeping records of what has been disclosed and using appropriate employment, contractor and intellectual property agreements.

What if an NDA is breached?

A breach may occur where confidential information is disclosed or used in a way prohibited by the agreement.

Depending on the circumstances, the affected party may be able to seek legal remedies, which can include compensation for losses or, where appropriate, an injunctionto restrain further disclosure or use.

However, once confidential information has entered the public domain, it may be difficult to reverse the damage. Businesses should therefore consider how information will be protected beforeit is disclosed, rather than relying solely on an NDA after a problem arises.

Are online NDA templates enough?

An online template may be suitable for some straightforward circumstances, but it may not address the particular risks of a transaction or commercial relationship.

For example, an NDA may need to deal with information that the recipient already possesses, information obtained independently, legally required disclosures or particularly sensitive intellectual property.

The appropriate confidentiality period may also vary. Some information may lose its commercial value relatively quickly, while trade secrets and proprietary processes may require protection for much longer.

Protecting more than just the paperwork

An NDA is only one part of protecting confidential business information. Businesses should also consider who has access to sensitive information, how it is stored and whether their wider commercial, employment and intellectual property arrangements provide appropriate protection.

How can Nevile & Co assist?

Nevile & Co Commercial Lawyers can assist with the preparation, review and negotiation of NDAs and other confidentiality arrangements, as well as broader commercial matters involving confidential information, intellectual property, employment and contractor arrangements and commercial transactions.

If you are considering disclosing confidential information, have been asked to sign an NDA or are concerned about a potential breach, contact Nevile & Co Commercial Lawyers to discuss your circumstances.

This article is general information only and does not constitute legal advice.