A confidentiality agreement. Why bother?

Do you have to share confidential information about your company? It can be wise to draw up a confidentiality agreement.

Perhaps you are looking to sell your company and want to share confidential information with a potential buyer. And maybe your employees have access to important company information. A confidentiality agreement is also useful if you want to discuss a good idea with an investor or partner. 

What is a confidentiality agreement?

A confidentiality agreement is also known as a nondisclosure agreement (NDA). It is a contract in which the other party agrees not to share or disclose certain information about you. In other words, the other person is obliged to keep that information secret. A confidentiality agreements lets you share confidential information. 

What is in a confidentiality agreement? 

There is no fixed format for confidentiality agreements and you can draw one up yourself. Get advice from a lawyer if necessary. In any case, a confidentiality agreement should state the following: 

  • which information should be kept confidential and which should not 

  • who is allowed to access the information 

  • for what period the information should be kept confidential 

  • the signatures of the parties involved 

  • penalty clause 

Confidentiality agreement - selling your business 

Have you found a potential buyer for your business? You will have to give them confidential information like past profits and forecasts. Prevent that information from falling into the wrong hands by having the potential buyer sign a confidentiality agreement. 

Confidentiality agreement - employees 

Usually, a confidentiality agreement for employees is not a separate contract, but part of the employment contract. Failure to honour the confidentiality agreement is grounds for dismissal. When the employee leaves the company, the confidentiality agreement remains in force. 

Confidentiality agreement - investor or partner 

Do you have a good idea or invention? And do you need money to implement the idea? Sharing sensitive business information with a potential investor can be difficult. After all, you run the risk that the investor or partner will steal your idea. You are particularly vulnerable if you have not yet protected your idea. A confidentiality agreement protects you from theft of your idea or invention.