What is the Non Disclosure Agreement?
We often hear the term - non disclosure agreement, or NDA - and use it frequently in business. This term is used when business entities, either individuals or organizations, are willing to establish an exchange of information before and during the business relationship.
Organizations use it to make sure they are exchanging their information, of many types which we will explore in this article, safely and confidentially, without the risk of losing or leaking their private and valuable information.
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NDA Definition and Entrepreneurial Usage
Entrepreneurs working in business will use the NDA agreements frequently when they need to exchange information with other parties, and interchangeably by sending or receiving requests to sign such agreements.
Other parties could be any legal entity, direct individuals, mediator between the entrepreneur and the other party, or an organization of any legal type.
Most of the below NDA types incur almost the same articles in the agreement, regardless of the scope, because the target is one: protecting the privacy and confidentiality of shared information.
NDA in Trading
Working in trading, local or international, you will be exposed to sign an NDA because your supplier does not want to share private information about his products (know-how, prices, qualities, locations, or others), unless he binds you, as a representative, in an agreement that guarantees, as much as possible, that you will not share this private and confidential information with any other party not mentioned in the NDA agreement.
For more information about trading, please check my article about international trading.
Note: The information could be posted somewhere in public, under his responsibility, by the party requesting to sign the NDA but still, he has the right to oblige you not to disclose it with this agreement.
NDA in Contracting
Working in contracting, you might have confidential information about a project within your territory and you need additional services and expertise from an overseas contractor. In this case, you might request from the contractor to sign your NDA template, and abide to your confidentiality terms and conditions.
NDA in Raising Funds
Entrepreneurs often require signing NDA with entities (investors, funds, Venture Capitals (VC)) that will provide them with funds. This scenario might happen in two ways:
If you are requesting funds from an entity, then you have an innovative product or service idea and you need to protect it with all its relative information. You are required to write a business plan and share highly confidential information with those entities.
The entity providing you with funds will share as well confidential information with you and it's per their benefit to sign such NDA. You can discuss with them amicably who will provide the template as long as the most important terms are included.
Be careful: In some countries like UK, it is not advisable to request signing an NDA from VCs, as it will be considered humiliating or non-respectful, especially if the VC is very famous and has a reasonable reputation in the market. In other countries, it can be negotiable but better to be careful.
From the entrepreneur side as well, if you are a very successful serial entrepreneur and you want to protect your innovative idea from leakage, you will play the role of opposing the signature of the NDA.
Important Articles in the NDA
It is noticeable that in the middle east business practices, the importance of NDA needs a serious revision as it is applicable everywhere but the effects are not binding in a way to prohibit any leakage of shared information. It is advisable to attest the agreement from binding parties to govern this practice and authenticate it appropriately.
- Listing of all parties with physical addresses, governmental identities like social security (SS#), commercial registration (CR#), Value Added Tax (VAT registration #), including the mediator if available (IF you increase the number of parties, you increase the risk of losing confidential information)
- Listing of definitions for the business, territory, what is confidential and what is not
- How do you want to protect the privacy and confidentiality of your information? How much abiding are your terms and conditions of agreement breach? It is advisable to consult a lawyer or a subject matter expert before starting this procedure
- What will happen if a breach from any party happens? How to escalate the problem and under which territory rules
- If the purpose behind signing the NDA is achieved, positively or negatively, between parties, how should the parties handle the hard and digital information shared? You can apply a type of enforcement to oblige the other party to destroy this content in written proposed ways
- Signatures and attestations
