All businesses know when they share their secrets with their third parties and employees, they are potentially putting them out for the competitors. With the number of companies appearing and succeeding on the market, it is natural to have unique business processes or strategies that you want to protect. NDA or Non-Disclosure Agreement is the document that many businesses tend to use with this goal.
NDA is a legal contract that states the way confidential information is shared, on what conditions and how it should be treated. These contracts are sometimes called confidentiality agreements.
In business, they are sometimes used when the business ideas in development are discussed with accountants, legal firms, marketing and design companies, etc. Also, they are commonly used when hiring new people for the team.
NDA is used whenever confidential information is about to be disclosed to investors, employees, third parties, etc. Ideally, it has to be signed by both parties before any sensitive information is shared. The nature of the confidential information can be enclosed directly in the NDA.
After signing this document, you will know that you can discuss any confidential information because it is now treated as your intellectual property and disclosing it to third parties will be protected by the law. In addition, in the document you can include the time that you want it to be kept hidden – it can be 5 years or always.
NDA is a great way to protect yourself and your business, but only if you do it in the right way. There are some things that you must include in the NDA to make sure that it is clear and works to your benefit.
In case the NDA is broken, the easiest way that the third party or an employee can avoid taking the blame for this is when their information was not written clearly enough. While preparing the document you must always remember its legal value and treat it accordingly. Don’t hesitate to check the information twice.
Probably the most important information is the nature of the confidential data. You must explain in detail that the information that is going to be discussed will be confidential before you share it. In the document, the person of reference has to understand what they must keep hidden from the outer way. It makes sense because if they have no idea what they must not disclose, they would hardly adhere to it.
If we sign this document, there are most certainly consequences for not following it. These consequences can be different - from a fine to quitting work to legal action. Most importantly is making sure that the third party or the employees are aware of them.
The popular point that business owners like to include in the NDA is employee solicitation. It in general means that the employee or a business partner that started working with the business and learning how they drive out their strategy cannot quit in a year and start their own business, taking their colleagues with them.
Usually, it also means that the employee for a certain amount of time won’t be allowed to work in the same niche as the company that asked them to sign NDA.
If confidential information is shared with third parties, that is done with some particular purpose. This purpose must be stated in the NDA as a permitted use of information. You should line out the instances where the third parties can discuss what you shared with them. For instance, employees can use it in the workplace and the investors during work meetings.
The same concerns disallowed use of information, you should also clearly state what third parties must not do with the information shared.
You can include various exceptions in the document starting from the parts of information that can be known to the public to the people you can share information with, such as your employees. It is important to say about the exceptions if there are some as it won’t work without stating that in the legal document.
Even though NDA is a useful document for business owners, not everyone is using it. Before deciding whether this is something you want to take to your company, look at the pros and cons of having an NDA.
As you can see, NDA is a way for business owners to save their secrets of trade and strategy from spilling out of the meeting room. This legal document helps when you are in the early stages of business and have to ask for a lot of advice about your creative idea from third parties. However, it helps just as much when you have an established business that keeps growing with new people and departments.
If you need help in figuring out how to compose your NDA, you can always ask professionals to give you advice. At Avitar, we are helping online businesses to follow legal requirements and grow successful companies. Contact us, and we will set you on a call with one of our specialists that will give you a full consultation on how to make the right NDA for your case.
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Violetta Loseva
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Serhii Floreskul
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