There will be times when a business needs to share commercially sensitive information with third parties outside of it. A non-disclosure agreement (NDA) is useful in this situation as it can limit the disclosure to the minimum necessary.
A well drafted NDA helps to restrict the use of your shared ideas or information to a specific permitted purpose. It will also prevent onward dissemination to third parties not bound by the restrictions. This is particularly important where you are sharing your information with a company who needs to pass it on to its directors and employees. As a company is a separate legal entity, you will need to ensure that individuals receiving the information are personally bound
by similar duties of confidentiality.
You should define how long the NDA will last and be aware that after that time, the information may be made public and used for purposes other than that specified. The period chosen should be such that, once expired, the information disclosed will no longer be of value to you.
In addition, you may wish to provide that:
- the copying of information is prohibited;
- on termination of the specified purpose, the information is returned to you or destroyed;
- you are only giving the rights set out in the NDA and no other intellectual property rights in the information are transferred;
- in the event of a breach of the NDA, financial damages are insufficient and accordingly
- you would be entitled to relief such as an injunction.
An NDA cannot prohibit disclosure of your information where compelled by law. For example, HMRC may legally insist on sight of certain matters. The NDA can however limit
the disclosure to the extent required by law
and provide that you are informed of it where legally permissible.
It is always worth taking legal advice to ensure your NDA is sufficiently comprehensive and covers all of the points you need. Finally, to be enforceable, it must qualify as a contract by the giving of appropriate consideration, or, alternatively, be signed as a deed.