NDA stands for Non-Disclosure Agreement. It is a legal document entered into between two or more parties that outlines confidential information about the parties shared within the contract and restricts either party from disclosing the same to third parties. Sensitive or confidential information includes information like manufacturing processes, secret recipes, formulae, innovative ideas, client lists, sales contracts, etc. It doesn’t include such information, which is or should be out there in the public domain. There are many instances when business owners (big or small), need to discuss sensitive trade information with outsiders. NDAs help in protecting the sensitive information and preventing others from revealing it to third parties.
It is a common business practice among large businesses to have an NDA in place. However, a common question that often arises in the minds of small business owners is if they need an NDA to keep their business safe. Many small businesses refrain from having an NDA undermining its uses and to save some extra pennies in the name of advocate fee. But the advantages of an NDA outweigh the cost incurred for the same. Given below are some of the instances when having an NDA proves beneficial for keeping your business safe:
- An NDA protects your business’ sensitive information while indulging in discussions regarding the sale of any product or licensing of any technology. While engaging in such a discussion, you are bound to give away sensitive information to materialize the discussion. There are obvious chances that the other party might put forward your confidential information as leverage in other similar negotiations. With an NDA you can prevent them from discussing your information or even the name of your organization in front of others.
- NDA keeps your sensitive information safe from employees: No matter how small your company is, you have surely worked hard to make it reach where it is today. And you surely have a set of talented employees who are dedicatedly working for the success of the same. But, it is just a matter of time when a part of your employees walk out and commence a competing business using valuable information gained from your company. An NDA signed with the employees of your organization will not only protect all proprietary agreements of your company but also valuable trade information.
- Many businesses hire outside service providers for availing certain kinds of services for their business. In most cases, these outside service providers need to gain access to sensitive information such as website content, social media accounts, email list and so on, to be able to perform their services. Entering into an NDA with such a service provider will save your valuable assets and information from being shared or exploited in any manner whatsoever.
- While indulging in any negotiations involving the sale of a part or whole of your business, you have to share every aspect of your business (whether financial or nom-financial). Having an NDA in place in such a situation protects your valuable business information from being disclosed in front of others. An NDA will also help in determining a serious buyer. It is obvious that initial negotiations may not materialize but at least it would keep all sensitive information protected from getting revealed.
- Small businesses generally seek out for more fundraising options for their growth as compared to big companies. Such a negotiation requires the business owners to share every minute detail about the business to the potential investors for them to make an informed decision. Having an NDA will protect sensitive information and prevent potential investors from using trade-sensitive information or sharing the same to others.
In a nutshell, Non-Disclosure Agreements (NDAs) are an important legal document to protect sensitive trade information irrespective of the size of business. Be it a startup or an old company, every business enterprise has its own set of creative ideas, processes, and innovations. An NDA protects these assets from getting stolen by people they are negotiating with. Anyone who breaches the terms of an NDA gets subjected to lawsuits and penalties as per applicable laws and regulations.