A non-disclosure agreement, also known as an NDA, is a binding agreement in which two parties exchange confidential information. The non-disclosure agreement agrees which information is confidential. It also describes what the party receiving the information may and may not do with the confidential information and for what purpose it is provided. An NDA is important when discussing a (possible) company takeover, among other things.
Confidential information secrecy declaration
For an entrepreneur or company, it is very important to protect confidential information or knowledge and intellectual property and to ensure that this information remains secret if business partners or investors become aware of it. To ensure that this information is used only for the purpose for which it was provided, an entrepreneur can enter into a non-disclosure agreement with these parties.
Non-disclosure agreement in business acquisition
One situation in which a non-disclosure agreement is used is, for example, a business takeover. When drafting a business acquisition contract, a non-disclosure agreement is drawn up so that the buyer and seller can talk openly about any confidential business information. For example, a buyer wants insight into the seller’s records and business operations. On the other hand, the selling party wants to see information to get a good picture of the buying party. This information is usually as valuable as it is competitively sensitive. An NDA makes it possible to freely exchange confidential information in the exploratory phase of a business acquisition.
Communicating openly and confidentially
A company or entrepreneur with a unique invention, proprietary creative work or other type of intellectual property betting on a collaboration with or acquisition by another company would do well to enter into a written non-disclosure agreement (NDA). This allows business or acquisition plans to be discussed openly, without fear of the interlocutor taking over ideas and putting them into practice without permission.
Often, a merger or business takeover also involves due diligence, where a thorough book examination is carried out by the buyer, exposing him to all ‘inside information’. Because the business acquisition contract agrees to keep specific information confidential, a non-disclosure agreement allows open communication between parties.
What is covered by a non-disclosure agreement?
Not everything can be kept confidential under an NDA. Marketing plans, business plans, financial information, correspondence between the parties and information deemed confidential by both parties can be protected. However, a non-disclosure agreement does not protect information that becomes publicly available, confidential information that a party discovers through legally independent means, and information that a party considers non-confidential. Information released as a result of a court order is also not protected.
Types of non-disclosure agreements
NDAs are one of the most common types of commercial contracts. They come in many forms. Besides the purpose for which the agreements are written, an important distinction can also be made between unilateral and reciprocal NDAs. The former protects only the information of the party that drafted the agreement, while the latter protects the confidential information of both parties.
What is to be protected by the non-disclosure agreement also entails that the agreement calls for different content. For example, a non-disclosure agreement in a business acquisition has a different content than the confidentiality surrounding a settlement agreement when ending an employment relationship. Other examples include a non-disclosure agreement for an invention, information related to a business venture and a media concept.
Core elements NDA
Nevertheless, a number of topics recur in every non-disclosure agreement. First, the parties between whom the non-disclosure applies should be clearly stated. Very important next is to give a broad description of what is to be protected by non-disclosure. Next, it should be clearly defined what constitutes confidential information. It is often still forgotten to include the duration of an NDA. This can be determined by mutual agreement.
What is the duration of a non-disclosure agreement?
Some confidentiality agreements are for an indefinite period, while others contain information that may be disclosed over time and therefore have a shorter duration. If the non-disclosure agreement is international in nature, do not forget to specify which country’s law will apply if parties get into a dispute. While these critical elements form the basis of a non-disclosure agreement, every agreement is, by rights, bespoke. Therefore, we advise you to ask one of the specialised corporate lawyers at Fruytier Lawyers in Business to draft an NDA for you.