A non-disclosure agreement (NDA) is a basic contract usually used in a situation where you have to disclose important and valuable information about your business to someone you trust.
There are several situations in the normal course of the business that requires you to share private and confidential information with an individual or a company.
Generally speaking, the NDA can be used anytime you want to share something valuable about your business and ensure that the other party doesn’t use this information without your consent, or worse, steal your information.
Here are a few examples of situations where a business will need to draft and execute an NDA.
- the sale of a product that you own
If your intent is to sell a product you own, you will want to prevent the potential purchaser from using your information to leverage the same during the negotiations with your competitors. That’s why it is important to protect your valuable and sensitive information with an NDA.
- When you recruit employees, who will have access to confidential information or trade secret
Since you have worked very hard for growing your business, you will want to protect all your valuable information such as the list of clients, suppliers, and trade secrets from your employees. Ensure that your employees sign an NDA as a formality of the recruitment process which shall prevent them use your sensitive information and opening a similar business.
You must also ensure that the NDA is enforceable in your jurisdiction.
- Discussing an offer with a potential investor or partner
During the discussions held with a potential partner or investor, you are going to reveal a lot of sensitive information to the other party – financials and personal information as well as company information. You must ensure that all this sensitive information is protected.
4. Receiving services from a company that has access to your confidential information.
Any service provider will have access to your confidential information in order to perform the services agreed upon. Therefore, it is highly recommended to always sign an NDA with all your services providers in order to protect your confidential information.
5. Sharing business information with a prospective buyer.
In the event you decide to sell your business, you will have to show all your sensitive information to the potential buyer which includes your financial data, your operations data, and your legal information. It is always recommended to put in place an NDA in this situation, so your confidential information will be protected.
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