Do I need a Confidentiality Agreement?
People like to talk. They will talk about things you may not expect them to talk about and you would keep to yourself, as you would recognise the sensitivity of the information. So, if you are looking to be involved in a sale or purchase of a business then the answer, almost certainly, is “yes, you need a confidentiality agreement.
Whether an asset or share acquisition, parties will need to get together to start negotiations.
It is recommended that a full Confidentiality Agreement is signed between the parties at the outset.
Won’t Heads of Terms deal with confidentiality?
Generally, Heads of Terms will be drafted in such a way that its terms will not be binding on the parties. However, certain terms can be drafted as binding and would usually include confidentiality and exclusivity provisions.
However, Heads of Terms may take several weeks (if not longer) to agree before they are signed.
In the meantime the parties will usually be holding discussions and forming the ‘deal’ and will wish to have some security with regard to disclosure of confidential information.
For example, parties will not want their trade secrets released into the public domain by rogue enquirers, assumed to have genuine interest in buying or selling a business.
Parties may require more in-depth confidentiality provisions than might usually be covered within Heads of Terms.
What provisions would typically be contained in a Confidentiality Agreement?
- A definition of what constitutes confidential information.
- Provisions specifying those entitled to use confidential information and regulating how confidential information can be used.
- Provision specifying If and when confidential information can be disclosed.
- Provision specifying when confidential information shall be returned to its owner (if applicable, whether in hard copy or soft copy).
- Provisions dealing with Intellectual Property protections.
- Restrictions and non-solicitation provisions (e.g. relating to staff, customers and suppliers).
So what’s an NDA then?
NDA stands for Non-Disclosure Agreement and is often referred to in the alternative to the term Confidentiality Agreement. Both will generally cover the same types of provisions i.e. defining confidential information and regulating how this can be used.
Want to know more about confidentiality agreements?