A non-disclosure agreement is a legally binding contract that establishes a confidential relationship. An NDA may also be referred to as a confidentiality and non-disclosure agreement. An NDA defines confidential or commercially sensitive information (collectively referred to as “confidential information”), which must be kept secret between the parties. Furthermore, it aims to prevent the unauthorised use, sharing or application of confidential information.
As entrepreneurs, we have all heard of NDAs. We may even have felt a little FOMO when hearing of it being applied or receiving one when we do not have one.
When are NDAs most appropriate?
An NDA is best suited where you may want to share information with a third party (outside your organisation). Also, another agreement does not deal with the safe exchange of information or its potential abuse. This is because employees, for example, are usually bound to confidentiality in their employment contracts. Also, the Companies Act and shareholder agreements deal with conflicts of interest and avoid exploiting commercial opportunities at companies’ decision-making levels. NDAs can therefore be valuable in all other contexts.
NDAs can apply to both parties towards each other and protect their respective sharing of confidential information. It can also use for a specific time or indefinitely. Therefore, what fits your sharing situation best is a question of context.
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