You may have a valid reason for sharing valuable company information. In fact, sometimes you have no choice but to do so. One of the best business decisions you can make is to protect confidential information through the use of a nondisclosure agreement, or NDA.
Why you need a nondisclosure agreement
Various situations arise that could prompt you to draw up a nondisclosure agreement:
- Your employees may need access to confidential company information to do their work.
- You may want to present an idea or product to a potential investor, distributor or partner.
- A prospective buyer or licensee needs to see the new technology or product you have developed.
- You will be sharing marketing, financial or other company information with a prospective buyer.
What should be included
Nondisclosure agreements are not usually lengthy documents; typically they are only a few pages long.
In it, you will define what is confidential, identify the parties to the agreement, outline the obligation of the receiving party, identify any exclusions from confidentiality and state the term of the agreement.
One word of caution: Will the recipient divulge the confidential information to others, like another company, a partner or an agent? Make sure the agreement covers all entities that might be given access to the information.
Two parts of the agreement
The first part of the NDA should address the need for the recipient to keep the information secret, and that he or she should ensure that it not be disseminated carelessly. The second part should state that the recipient(s) cannot use the confidential information for his or her personal benefit.
A legal document
The ideal nondisclosure agreement should be broad in scope so that if the other party were to breach the non-use agreement or confidentiality responsibilities that are part of the NDA terms, you would have the right to sue for damages.