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Making Sure Your Non-Disclosure Agreement is Enforceable

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This article has been submitted by Greenaway Scott

For many companies, their success is heavily reliant on their ability to effectively protect confidential information.

Within the food and drink industry it could be a recipe, while many businesses rely on confidentiality on a daily basis to ensure their practices are protected.

In these instances it is vital to draft a non-disclosure agreement.

Non-disclosure agreements also known as confidentiality agreements are very useful and effective for protecting your company’s confidential information.

For example, when two parties enter into discussions for the first time, in order to evaluate the potential for a future business relationship.

During such discussions it is likely that confidential information will be exchanged and it is important to make sure that if the discussions go no further, the information shared will not be placed at risk.

It is important however that the confidentiality agreement is correctly drafted or there is a risk that it will fail to offer adequate protection, or be unenforceable.

The main points to consider for ensuring the best protection are the following:

  • Confidential information – This will be a specific definition with the agreement and sets out the information that is being protected. It is critical that the information in question falls with this definition or it will not be protected.
  • Exceptions – There are exceptions to the definition of confidential information. If the information was already public, becomes public, or is provided to the receiving party by a third party it will cease to be confidential information.
  • Purpose – This will be a defined term in the agreement spelling out the exact purpose for which the receiving party can use the information. The definition must be broad enough to facilitate the discussions, but narrow enough to prevent inappropriate use.
  • Group Companies – Is the receiving party a company which is part of a group? Will it need to share the confidential information with other companies within its group? Such consideration needs to be reflected in the agreement.
  • Mandatory disclosure – It is important to keep in mind that there are some types of disclosure that cannot be prevented by a confidentiality agreement. For example, if a company is required by court order this cannot be prevented.
  • Term – How long should the obligations of the agreement last?
  • Relationship between the parties – A well drafted agreement will include provisions which make sure that no formal relationship is formed between the parties and that no obligation is placed on the parties to continue discussions.
  • Additional provisions – If you are given a confidentiality agreement to sign, there is a possibility that additional obligations such as non-solicitation, or non-compete clauses will have been included in.

This article is for information only and does not constitute formal legal advice.