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Protecting your confidential information with an NDA
By Daniel Burns, Partner and Head of Company Commercial
Running a business invariably means that you will build up sensitive business specific information; whether that is a novel manufacturing technique, the confidential information of your clients, or even your staff wages, it is obvious that you would not want this information in the public domain.
However, there are going to be occasions where you do need to divulge this information to a third party. For example if you are selling your business, any prudent buyer would want to know staff salaries amongst other things, or if you intend to enter into a joint venture you may be expected to share your novel manufacturing method with your partner.
In any situation where you want to protect confidential information it is sensible to have an NDA (non-disclosure agreement, also known as a confidentiality agreement) in place before you hand over your confidential information.
Some key points you should consider in the NDA are:
- Confidential information. Firstly and most obviously you must narrow down what information you are trying to protect in the NDA. It may be tempting to make all of your information “confidential information” but by doing this you run the risk of a court ruling your NDA unenforceable.
- Who else can access your confidential information? – it is possible that whoever you are giving access to the confidential information will also need to let other parties have access. For example where you are disclosing to a company it would be normal for some (but maybe not all) of their employees to have access to the confidential information as well. In this case a provision should be added to the NDA requiring all employees (or those who will need access) to enter into an NDA as well.
- Why are you disclosing the confidential information? Usually you will be disclosing the confidential information in order to pursue a goal or purpose. For example, giving an interested buyer of your business access to certain confidential information to allow them to assess whether they actually wish to acquire the business. In this case, the NDA should not prevent the potential buyer from investigating the business, the NDA should only step in where they use that confidential information for a purpose which is unconnected with their main task, for example, for their own commercial advantage.
These are just some of the points that needed to be looked at closely where you are trying to protect confidential information.
Please note the contents of this blog are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.