We’re all familiar with NDAs (or nondisclosure agreements). NDAs are written agreements/contracts that protect sensitive and confidential information between two parties. But WHEN EXACTLY SHOULD STARTUPS USE AN NDA? Here are a few common situations when startups should consider using an NDA:

• Employee Agreements: Whether you own a startup business or a vast enterprise, before hiring an employee with access to confidential company information, customer lists, and trade secrets, you should have them sign an NDA.
• Discussions with Potential Investors: While pitching to potential investors is hopeful and exciting, take a moment to consider using an NDA when presenting detailed financial and strategic information.
• Mergers and Acquisitions: An NDA is a critical part of M&A negotiation. Mergers and acquisitions require sensitive financial, legal, and operational data to be exchanged, and this information should be kept strictly confidential.
• Collaboration or Partnership with other Businesses: When collaborating with another business, an, NDA can protect both parties as they discuss confidential business plans, strategies, and financial information.
• Contractor Relationships: An NDA is a must if your business outsources work to third-party vendors or contractors who will access confidential data and processes.

Now that you have an idea of when to use an NDA, your next question is likely WHAT TO INCLUDE IN AN NDA? Are there any specific clauses to include in an NDA? Don’t worry, we’re here to help. Here are a few tips for information that should be included in an NDA:

• Identify the parties: Clearly identify which party is disclosing information and which party is receiving information.
• Define Purpose and Term: Clearly state the purpose of sharing confidential information. Include the duration of the agreement / how long the agreement will be effective.
• Obligations of the Receiving Party and Exclusions: Spell out the obligations of the receiving party, including not disclosing, using, or copying any of the confidential information for any purpose aside from the stated purpose in the NDA. Additionally, lay out exclusions, or put differently, the information that is not confidential and is excluded from the agreement. Typically, this is information that is already public knowledge or is already known by the receiving party prior to the agreement.
• Remedies: An NDA should address remedies in the event of a breach of confidentiality under the agreement. Remedies may include an injunction (a court order to do or stop doing something) and the right to reimbursement for attorney’s fees required to enforce the NDA.
• Consult Legal Counsel: Ideally, you should have an experienced attorney prepare your NDA to be sure the NDA complies with applicable laws and includes necessary information.

NDAs (nondisclosure agreements) are an excellent method to protect parties when sharing confidential information. NDAs are not just a formality; an NDA is a legal document that ensures protection not just for the parties involved but for the information, data and assets involved.

This information is presented for general informational purposes only, is not for the purpose of providing legal advice, and is not intended to represent a full or complete list of all possible issues. This information should not be construed as legal advice and does not create an attorney-client relationship. You should seek the advice of an attorney regarding your particular situation.