When to use a Non-Disclosure Agreement (NDA)?

Last Updated at: January 14, 2020
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There are many situations in the business that will require one to share the private and confidential information with another person or company. In order to make sure that the other person or company respects the confidentiality, a non-disclosure agreement (NDA) is used.

NDA can be signed anytime when one wants to share something valuable about the business and ensure that the other party does not use it without approval, or outright steal it.

Five situations where Non-disclosure agreement takes place-

Discussion related to the sale or licensing of a product or technology

If the sale or licensing of a product or technology is taking place, then the one who owns it want to prevent the prospective purchaser from using his/her information as the influence in other negotiations.

While there is nothing which is stopping them from telling that they have a lower offer somewhere else. But the true owner does not want them to disclose the actual data or even the company name, especially to a contender. A lot of company information and financial prospects will get exchanged during discussions. So, this is one of the reasons for protecting the company’s sensitive information with an NDA.

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Access to confidential and proprietary information by employees

It is not that easy to build a huge business. It takes so much persistent hard work and effort. So, it is always better to protect things like supplier and manufacturing agreements, proprietary processes, client lists, etc. Ensure that all the employees are barred from walking out and opening up a rival business using your treasured information.

Making an offer to a budding partner or investor

In some instances, adding a new partner or an investor can expand the business give the path for success. During these negotiations, there are high chances of revealing a lot of sensitive information about the company to the other persons such as business financials, personal information, etc. During these negotiations with multiple potential partners or investors, one needs to make sure the information which is being shared is protected.

Startups which are trying to raise funds from the venture capital investors need to be more careful when it comes to nondisclosure agreements. Because most of the venture capitals refuse to sign the NDA.

Getting services done by a company that has access to sensitive information

There are some companies which run paid campaigns for brands through which they collect a lot of data. Brands are spending so much money every month on these campaigns. This gives the company access to all the valuable information such as email addresses, leads, customers, pixel data, etc. of the brand.

In many cases, most of the brands fail to make an NDA which gives chances for the companies to misuse the data. So, while getting into an agreement with the companies related to data, brands should make sure that they make an NDA to avoid future complications.

Sharing sensitive information of business with a prospective buyer

Whenever there are any negotiations taking place related to the sale of the company or acquisitions it is very sure that all the relevant information related to the company is told to the buyer. As they are going to buy the company in the future it is very common to reveal all the sensitive information related to the company.

But the problem arises when the negotiations are not fruitful and the other party denies to acquire the company. At this point in time, the party will have the sensitive information related to the company with them and there are chances of misusing the information. So, while sharing this sensitive information only an NDA has to be made to avoid problems in the future.

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When to use a Non-Disclosure Agreement (NDA)?

934

There are many situations in the business that will require one to share the private and confidential information with another person or company. In order to make sure that the other person or company respects the confidentiality, a non-disclosure agreement (NDA) is used.

NDA can be signed anytime when one wants to share something valuable about the business and ensure that the other party does not use it without approval, or outright steal it.

Five situations where Non-disclosure agreement takes place-

Discussion related to the sale or licensing of a product or technology

If the sale or licensing of a product or technology is taking place, then the one who owns it want to prevent the prospective purchaser from using his/her information as the influence in other negotiations.

While there is nothing which is stopping them from telling that they have a lower offer somewhere else. But the true owner does not want them to disclose the actual data or even the company name, especially to a contender. A lot of company information and financial prospects will get exchanged during discussions. So, this is one of the reasons for protecting the company’s sensitive information with an NDA.

Get Your Legal Documents Prepared by Experts

Access to confidential and proprietary information by employees

It is not that easy to build a huge business. It takes so much persistent hard work and effort. So, it is always better to protect things like supplier and manufacturing agreements, proprietary processes, client lists, etc. Ensure that all the employees are barred from walking out and opening up a rival business using your treasured information.

Making an offer to a budding partner or investor

In some instances, adding a new partner or an investor can expand the business give the path for success. During these negotiations, there are high chances of revealing a lot of sensitive information about the company to the other persons such as business financials, personal information, etc. During these negotiations with multiple potential partners or investors, one needs to make sure the information which is being shared is protected.

Startups which are trying to raise funds from the venture capital investors need to be more careful when it comes to nondisclosure agreements. Because most of the venture capitals refuse to sign the NDA.

Getting services done by a company that has access to sensitive information

There are some companies which run paid campaigns for brands through which they collect a lot of data. Brands are spending so much money every month on these campaigns. This gives the company access to all the valuable information such as email addresses, leads, customers, pixel data, etc. of the brand.

In many cases, most of the brands fail to make an NDA which gives chances for the companies to misuse the data. So, while getting into an agreement with the companies related to data, brands should make sure that they make an NDA to avoid future complications.

Sharing sensitive information of business with a prospective buyer

Whenever there are any negotiations taking place related to the sale of the company or acquisitions it is very sure that all the relevant information related to the company is told to the buyer. As they are going to buy the company in the future it is very common to reveal all the sensitive information related to the company.

But the problem arises when the negotiations are not fruitful and the other party denies to acquire the company. At this point in time, the party will have the sensitive information related to the company with them and there are chances of misusing the information. So, while sharing this sensitive information only an NDA has to be made to avoid problems in the future.

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