June 11, 2024
NDAs ensure that when sharing this information, you can be assured that it is kept confidential. Our corporate and commercial team have summarised the key elements to protect your business when entering into NDAs.
What are NDAs?
NDAs are legal contracts which facilitate the sharing of confidential information between parties. Sometimes it is necessary to share information about your business which you would usually want to keep confidential. In the context of selling your business, a buyer will want to go through a due diligence process, which will require you to share lots of information about your business.
Naturally, you will want assurances that the information shared will be kept confidential. Therefore, an NDA is a useful tool to set down contractual obligations on the buyer to maintain the confidentiality of the information shared. These obligations include limiting how the third party can use or record the confidential information and will give you a right to request the third party to return or destroy the information upon any future request. Crucially, it will also set out who the information can be shared with – ideally, you would want that limited to such of the buyer’s employees and advisers who need to know the information for the purpose of evaluating the proposed acquisition of your business.
When should the NDA be entered into?
Ideally, you want to ensure that the NDA is signed before you share any information. Whilst it is possible to provide in the NDA that all information is covered by its terms (even if it was shared before the NDA is signed), that is a riskier approach as there is no guarantee the NDA will be signed.
Key clauses to look out for in an NDA:
How should confidential information be shared with a buyer?
We would also recommend sharing information via a secure data room, rather than relying on other solutions. This will ensure that the information is kept secure and you can control and monitor who has direct access rights. It will also enable you to remove access immediately if the transaction falls through for any reason.
In relation to personal data of individuals (such as your employees) you should ensure that this information is still anonymised before being shared in order to ensure compliance with data protection legislation.
NDAs are legally binding contracts which provide a level of certainty and security to parties entering into commercial relationships. It is important that they are drafted to be legally compliant and that both parties understand what they are agreeing to do.
If you require assistance with drafting non-disclosure agreements or any legal advice on your rights under one, contact Siobhan Williams on 029 2082 9124 or swilliams@darwingray.com for a free initial chat to see how we can help you.
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