The importance of using non-disclosure agreements as a business owner
If you’re a business owner, you’ll know how critical it is to keep certain elements of your business confidential. Whether you’re developing a new product or have a valuable client list, it’s vital to maintain confidentiality or risk your competitors using your ideas (or clients) for their own gain.
Ideally, the best way to maintain this confidentiality is not to disclose this information to other people, full stop. However, at some point or another, you may need to seek advice or speak to a potential partner in order to further your business. This is when you should use a non-disclosure agreement (NDA).
What is a non-disclosure agreement (NDA)?
An NDA is a legal contract between you and someone else. It enables you to share normally confidential information with a third party, while stopping them from passing this information on to others.
An NDA is sometimes also called a confidentiality agreement. Normally, one party agrees to disclose information to the other party for a specific purpose and the party receiving this information agrees that they will not reveal it to anyone else.
NDAs are useful in a range of different scenarios. For example, if you are considering collaborating with another business, you could use an NDA to make sure that any trade secrets that are discussed during negotiations are not shared with another party. An NDA could also be utilised if, for example, you have a new product for which you need to obtain a manufacturing quote. You could get the manufacturer to sign a confidentiality agreement in order to ensure that they don’t reveal information about your new product to others who could potentially copy your idea.
NDAs can cover everything from business plans to customer lists and even chemical formulae.
How long do NDAs last?
Normally, confidentiality agreements are limited to 3 or 5 years. After this time period has ended, the other party can disclose your information. Some information, such as lists of customers, could be kept confidential forever.
An NDA cannot be enforced once the information is made public.
Types of NDAs
NDAs can be one-way or two-way.
A one-way NDA is used when only one party is disclosing information. An example of when this type of NDA may be used is if a business with a product idea wishes to talk with someone who could potentially invest in their product.
A two-way NDA (or Reciprocal Confidentiality Agreement) is used when both parties are disclosing information to each other. This type of NDA can be used by, for example, businesses that are considering collaborating with each other.
If there are more than two parties who are the disclosing and or/receiving party, a Multilateral Confidentiality Agreement can be utilised.
Download a non-disclosure agreement
A downloadable non-disclosure agreement is a quick and inexpensive way to protect your business’ interests when disclosing confidential information. If both parties are disclosing information, please download a Reciprocal Confidentiality Agreement.