Importance of a Non-Disclosure Agreement (NDA)

Introduction

Non Disclosure Agreement is a legal contract between two parties which outlines the following:

  • What constitutes as Confidential Information or Knowledge.
  • Restriction of such information.
  • Information that is permitted to be shared with Third Parties.

Partnerships, expansions, formation of companies, they all involve big ideas. Whether you are hiring employees for your project or sharing your ideas to potential business clients or investors, a company is often put in a vulnerable spot.

The information that is shared during the above ventures are vital information about marketing strategies, business plans, patents, working schemes, or other necessary relevant data. Such information should be protected at all costs for the ultimate benefit of your Company.

NDA protects such confidential information from being disclosed to third parties. More often than not, startups who are at the early stage of their company formation, or even mid-tier Companies who are hiring new employees overlook this aspect, which is so crucial.

Our Team lays down some of the Important areas where a Non-Disclosure Agreement will be highly useful for your business venture:

 

1. Protection of Existing Company Data-

This is one of the most common and most needed reasons for using an NDA. As a Company or an entrepreneur, it is generally required that your financial information, trade secrets, client information, or any sensitive information is best protected. This will only help you run your business effectively, as future legal disputes can be avoided. An NDA will discourage employees and contractors from selling or sharing information with third parties or competitors to profit themselves.

 

2. Negotiation Phase-

If your Company is getting into a discussion with another party, whereby it’s required as part of the contract or due to circumstances that some of your ideas are going to be shared with such party, the need for an NDA is a must here. There should not be a slither of a chance that your company’s confidential information will be shared with other parties who are not part of the negotiation. The Competitors should not be aware of your strategies!

 

3. Hiring new Employees-

The new employees you hire for your business are often exposed to the inner workings of your Company. Access to client details, business plans, or other information are often shared with such Employees for a smoother operation. By making sure that such Employees are prohibited from simply walking out of your company, and using the ideas that they learned from working under your care by using your business’ valuable information, will save you tons of lawsuits in the future.

 

4. Introducing a Potential Partner or Investor-

Although this point is a bit similar to Point 2 that we talked about earlier, but in our practice, we have seen that it’s most often overlooked. Taking a new partner or an investor into the business can breathe new life and bring new opportunities to your venture. It’s crucial to be on the same page and establish safeguards for any disagreements in the future. By making sure everything that you have worked on is protected from potential competitors, it’s important to have such Potential Partner or Investor sign an NDA.

A good NDA is one that has been tailored to your specific needs and requirements. Please note that, although there are tons of free templates online, such NDAs could leave your business vulnerable and are often filled with problems.

To read more about such Problems, please head over to this Link. Our Team has compiled a list of problems that you should keep in mind while using a free NDA Template.

 

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