Contents

  1. 1. What is a Non-Disclosure Agreement?

Non-Disclosure Agreement Template

June 28, 2021In business, there will be times when you need to share sensitive information with another party. You might have innovative business plans or financial projections that you want help with or need advice on. But how can you make sure that your business information and confidential conversations remain secret and confidential?The answer lies in creating a robust non-disclosure agreement. This will allow you to share valuable information and sensitive subject matter with selected third parties, knowing that such information won’t be made public knowledge. In this article, we’ll talk you through the must-haves of a non-disclosure agreement, and we’ve also created a helpful non-disclosure agreement template for you to download and edit if you ever need to create your own non-disclosure agreement.If you’ve never created a legal document before, or if this is the first time that you’ve decided to share confidential information about your business, it’s easy to feel a little nervous. After all, this is your business, that you’ve poured your heart and soul into, and the last thing you want is to find that your competitors are getting wind of your trade secrets.Don’t worry, we’ve got you covered. By the end of this article, you’ll feel confident about drafting your next non-disclosure agreement and be ready to share confidential information safe in the knowledge that you have a formal document in place, ensuring that everyone involved will keep the information private.

What is a Non-Disclosure Agreement?

A non-disclosure agreement (NDA, or sometimes called a confidentiality agreement) is a formal document that sets out how to share confidential information between two or more parties. It is a legal contract that allows you to share ideas, conversations, financial figures or information in confidence.When someone signs a non-disclosure agreement, they agree not to share the sensitive information they receive in the agreement with anyone else. This prevents confidential company information and intellectual property from ending up in the hands of competitors, protecting the company’s interests. If a party signs an NDA and leaks the confidential information in the agreement, then there can be serious legal repercussions. However, a poorly written NDA might not stand up in a courtroom, so it's important to create one that is clear and easy to understand. Let's take a look at how to do just that.

Reasons why you might need a Non-Disclosure Agreement

There are several instances when a business might want to draw up a non-disclosure agreement. For example, early on in your business journey, you might be talking to a wide range of investors to raise funding. They will need to see plenty of financial projections and other confidential information to know if you’re worth taking a punt on.However, just because you’re happy to share that information with potential backers doesn’t mean that all and sundry needs to know your business. We’re not suggesting that angel investors and venture capitalists are indiscreet or gossips, but it’s better to be safe than sorry!Start-ups will also need to reveal details of their products or services to possible partners or investors but won’t want that information leaking out to potential competitors. An NDA will also prevent that next million-pound new product idea from being stolen by unscrupulous rivals. If you’re getting ready to enter a partnership, then having an NDA gives both sides the chance to get to know each other before committing, without the risk of having their sensitive information being made public. If your company ever needs to hire an outside advisor or consultant, then you may also want to have them sign an NDA if their role means that they will come into contact with sensitive company data. Some companies will also ask their employees to sign an NDA, depending on the kinds of projects they’re working on and the risk to the company if information about these projects becomes public. You can’t always assume that a conversation will be kept private, or that everyone has the same moral scruples as you. In order to protect yourself, your business and your ideas, it’s useful to draw up a non-disclosure agreement. If someone asks you to sign a non-disclosure agreement, it doesn’t mean that they don’t trust you. It just gives them, and you, a formal structure to share sensitive information. Likewise, if you ask someone to sign an NDA, you won’t damage your relationship with them.An NDA serves to protect the parties signing it and give clarity over what can and can’t be shared. Being clear from the beginning will allow both sides to move forward and do business together.

Is a Non-Disclosure Agreement a legal document?

In short, yes. If someone signs a non-disclosure agreement and then leaks the confidential information to a third party, then there can be serious legal repercussions. Breaking a non-disclosure agreement could lead to expensive lawsuits, or even lead to an injunction (where a court orders parties involved to either carry out or refrain from doing something). If your business experiences financial losses because of the confidential information leaked, then you can claim for the losses. You may be surprised to learn that, even though a non-disclosure agreement is a legal document, you don’t have to hire a lawyer to write one. However, if you write it incorrectly, leave something out or try to include something that isn't considered truly confidential, then the agreement will be unenforceable. Because of this, it’s sensible to at least consult a legal professional, or let them have a glance over the document before you get it signed and sealed. When it comes to writing this document, you should also remember that there are some things that non-disclosure agreements don’t cover, such as: 

Whistleblowing 

A non-disclosure agreement can’t be used to stop anyone from whistleblowing. A whistleblower is an employee reporting wrongdoing that affects others.  Examples of whistleblowing include reporting fraud or other criminal activity, a risk to someone’s health and safety, environmental damage or someone covering up wrongdoing.

Reporting to the authorities

A non-disclosure agreement is not legally binding if it tries to stop an individual from reporting something to the police or a regulator. 

Information in the public domain 

Information that is already in the public domain isn’t considered confidential, and therefore can’t be enforced by an NDA. Also, if you reveal information to an individual before they sign the NDA, then the agreement can’t be enforced. Finally, you’ll also need to give the person signing the document time to consider and consult their own legal representative before signing, or it may not be enforceable. 

Different types of Non-Disclosure Agreements

Just as there are different kinds of information that you’ll want to keep confidential, there are different kinds of non-disclosure agreements to suit your needs. There are agreements that cover sharing confidential information with employees, other companies entering a business venture, interviewees during the recruitment process, or details about an invention or a design. The guide and template we’ve provided covers a basic non-disclosure agreement. If your requirements are more complex, then we would recommend speaking to a law firm or your solicitor to get something specific drawn up. Each non-disclosure agreement is unique in terms of the confidential information that it is protecting. That said, there are generally two main kinds of NDAs that you will usually come across: 

One-Way Non-Disclosure Agreement

A one-way non-disclosure agreement (or unilateral NDA) is a contract that involves two parties, but only one of the parties is disclosing confidential information. If this is you, you are usually called “the disclosing party” in the contract.If you need to share confidential information with another individual or business, then you can draw up a one-way nondisclosure agreement or unilateral non-disclosure agreement to protect your company’s sensitive information, ideas and designs.

Mutual Non-Disclosure Agreement

A mutual non-disclosure agreement, also known as a mutual confidentiality agreement or a mutual NDA, is used when both parties in the contract are disclosing confidential information. Signing the document creates a confidential relationship between the parties in the agreement, with each side being given equal protection.

Can I write a Non-Disclosure Agreement?

Yes, you can. You don’t need a lawyer or a professional to do this and you can write the document yourself, although it is a good idea to have your solicitor at least look it over. If your needs are more complicated, or the nature of the information you need to share is more complex, then it is worth getting legal advice. We will walk you through all the basics that you need to include when writing your own non-disclosure agreement. We have also created a handy NDA template for you to download and edit as you see fit.  However, this is your business and you know the information that you need to share better than anyone, so feel free to tweak this template as you need and consult your own solicitor for clarification.

How to write a Non-Disclosure Agreement

Most non-disclosure agreements follow a fairly standard format, and this isn’t the time to go off-piste and create something wacky and wild. Even though this is a legally binding contract, you don’t want to stuff it with legal jargon and corporate spin. There’s no point in confusing the other parties and yourself. You’ll get off to a better start if all sides understand exactly what they’re signing, and what needs to be protected.Before you start writing, it’s also helpful to have a clear idea in your head of exactly what information you do (or don’t) want to share. This will help you later and save you from writing an agreement that is longer than it needs to be. Your own NDA will be individual to your business needs and the information you need to share, but there are some clauses that will be in every NDA. Common clauses include the following: 

Establish the parties involved

First, you need to establish the parties that are involved in this agreement. Are you sharing information with a business or an individual?Are they receiving sensitive information from you, or is this a two-way street? This will tell you if you need to draw up a one-way or mutual non-disclosure agreement.In this section, you’ll need to define the disclosing party (the side that is sharing the confidential information) and the recipient party (the side that is going to receive the confidential information). Be specific here, you don’t want to run the risk of the agreement being invalid because the wording is vague. You can also define specific instances where the recipient party can disclose the confidential information you’re sharing. This may sound counterintuitive but stay with us. The other side may have lawyers or employees that they’ll need to disclose this information to, to allow them to work with you. If that’s the case, be sure to include this in the agreement so it doesn’t slow your work down.

Confidential information

The most important part of your non-disclosure agreement is, unsurprisingly, defining the confidential information that you're going to share. This is the whole point of writing the agreement, and you need to clearly state what is not to be disclosed by the receiving party.This section could include all kinds of different trade secrets, financial information and design ideas. Common examples of NDA-protected information that you might find in a confidentiality agreement include:
    Business venture details like mergers, acquisitions and partnershipsPatents and designsSoftware development detailsCustomer listsRecipes or special formulasInventions and designsPricing structures
If this section is left ambiguous, and you need to take legal action after confidential information has been shared with a third party, then you may not have a leg to stand on in court. Be specific about exactly what information you want to remain confidential.If you want to cover all your bases, you could even say that all information disclosed by you, the disclosing party (whether in writing, emails or conversations) should be considered confidential. As long as you're clear and specific, then you'll give yourself the best protection in the agreement.You could also give the reasons behind disclosing this confidential information, for example, if it's for a certain project, or to raise funding.

Definitions

Even though you will be writing most of this agreement in plain English, there will be some legal and technical terms that creep in. That's OK. After all, this is a legal document and may refer to some complex areas of your business.To make it easy for the person reading – and later signing – the contract, it's helpful to provide a short section in your non-disclosure agreement that gives the definitions of certain terms like "confidential information" or "parties". Remember, just because a term seems obvious to you, it doesn't mean that everyone will understand what you mean.

Exclusions clause

In this section, you can detail any information that won't be covered by the NDA, such as ideas that you have already shared before signing the agreement, or information that is already out in the public domain.In the interests of transparency, you could also add that the receiving party can disclose information where they're required to do so by the law, but that you expect some prior notice before they do. Hopefully, this won't be an issue for you, it's just about giving you and your business as much protection as possible and giving you peace of mind that you've covered all eventualities.This is all about being clear and upfront with everyone signing the agreement so that you can all carry on in good faith. As long as you've created a specific NDA, then all sides can focus on your project together without worrying about what is and isn't covered.

Non-Disclosure obligations

This section is made up of multiple clauses which specify the obligations that the receiving party has to keep the disclosing party's information confidential. This can include implementing security features to protect information shared electronically, which the receiving party will probably already have to protect their own business interests. Basically, you'd expect them to treat your own trade secrets with the same care as they would their own.Some companies choose to add a non-compete clause in this section, which states that the receiving party can't engage in business that directly competes with the other party for a certain amount of time.

Non-Disclosure Agreement duration

Very simply, how long does the non-disclosure agreement remain in effect, and how long should the receiving party keep the information shared confidential? You'll need to be explicit and say exactly how long this agreement should last.Every project and NDA is unique, so there is no "right" length of time for you to put here, just what works for you and your business.If you really wanted to, you could put an indefinite time period, with the understanding that the information shared remains confidential until it's no longer considered a trade secret, but that may not be practical and it may be simpler to just give a specific timeframe.You can state that the agreement and the receiving party's duty to keep information secret remains until the date marking termination of this agreement, or until the disclosing party gives written notice releasing them from the agreement.

Return of information

When the NDA comes to an end, what will happen to the information that you've shared with the receiving party? You can't assume that all the information you've shared will be destroyed at the end of your project. Obviously, we'd like to hope that everyone you're dealing with has the same high moral standards that you do, but again, it's best to protect yourself. Any physical documents and paperwork should be returned to you, but don't forget electronic messages like emails. If you want all electronic communication that the receiving party has on the confidential information shared deleted, then say so.If you want the receiving party to destroy any confidential information at the end of the agreement, then you are perfectly within your rights to ask for this. Just make sure you say exactly what you want to happen in the agreement.

Additional items and clauses

If you want, you can include other clauses in this agreement such as:
    A non-solicit clause, which means that the other party can't solicit business from the disclosing party's business.Remedies, which say what will happen if a party breaks the agreement.Amendments, which can be changed later on.

Signatures

Finally, all parties will need to sign on the dotted line. Once they have, you now have a binding, legal contract that will keep your trade secrets the way they were meant to stay – secret.Sometimes a party will have a representative sign, such as the company director.Finally, don't forget to put the date, so that all parties know when the terms of confidentiality start.

Summary

Now that you know all the must-haves for a non-disclosure agreement, you can go ahead and write your own the next time you need to raise funding, share an exciting new idea or enter into a partnership.We hope that you feel ready and confident to draft your own NDA after reading this article, but we'd like to remind you that we're not lawyers, and it's always worth having a legal expert at least take a look at your non-disclosure agreement.
Daniel Hogan
Daniel HoganCOO & Co-Founder

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Non-Disclosure Agreement Template

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