3 Situations that require a Non-Disclosure Agreement

In all the excitement of a new partnership or business venture, sometimes we forget the serious side too. Fact is, without a non-disclosure agreement, or NDA as it is more commonly known, you risk exposing some of the valuable, and saleable, secrets of your success.

When should you prepare and sign an NDA? Here are three situations you might want to consider.

1. Discussing a (new) product or technology
If you are thinking of discussing a product or service with a potential purchaser or partner, you will want to prevent them from sharing that information with competitors – or worse, use them as leverage in negotiations.

Also, if you do not end up doing business with that individual, you will not want them disclosing your data somewhere else. A lot of financial and company information will exchange hands during discussions and the only way you can make sure you are protecting your sensitive company information is by drawing up an NDA – even more so if you are thinking of developing new products to market.

2. Restricting employee access
Your employees are probably the people with the easiest access to your company’s sensitive information, so what are you doing to protect yourself? Things like proprietary processes, supplier and manufacturing agreements, client lists, etc. all need to be protected. Make sure that your employees are prohibited from walking out and opening up a competing business using your valuable information – after all, it took you a long time to build it, don’t just give it away.

3. Thinking of buying a business
Should you ever get to the stage where you are ready to buy-out or look at acquisition offers, you are going to have to show all of your cards. This will include a lot of sensitive information, including financials, operations and more. Everything will need to be divulged to the potential buyer when selling your business.

If you have an NDA in place, however, it will prevent any tire kickers from scoping you out and using your knowledge and experience to their advantage. Larger businesses will generally use an experienced broker that will require proof of funds and the ability to close the deal before any information is released, along with a signed NDA – so it’s always a good idea to have one.

What sort of thing should your NDA include?
At the very least an NDA should clearly outline who is liable under the agreement, what is deemed to be confidential and the scope of that confidentiality, as well as any exclusions.

There are loads of DIY kits out there, but don’t be tempted to cut corners. An experienced lawyer can draw up an NDA specifically for your needs. They can also be in hand if things go wrong, for example, where the contract is broken and sensitive information is released to the public.

While there are a lot of generic NDA templates available online, the cost of a NDA specific to your needs and location can save you time and money in the event it needs to be enforced down the line.

If you would like more information, speak to the Corporate and Commercial team at Downs Solicitors for more information.

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