A confidentiality agreement is an agreement between two or more parties which is entered into when the parties wish to share certain information with each other for a specific purpose, but they want to prevent this information from being disclosed to others. It may also be known as a non-disclosure agreement or a confidential disclosure agreement.

Application for small business people

Small businesses regularly enter into dealings with other parties which require them to disclose information that they would like to keep out of the public domain. For example, when a small business is being sold or merged, information about such things as the businesses performance, products and assets will typically need to be disclosed to potential purchasers or investors to enable them to make an informed decision. The parties to the transaction will generally want to know specific details about the company operations and future potential. However, it is likely that the small business may suffer financial loss or other harm if this information is disclosed to competitors or the public at large. A confidentiality agreement enables the parties to share this sensitive data, while preventing it from being divulged to other third parties.

Small businesses also enter into confidentiality agreements with employees, contractors or consultants. These agreements may cover information about the company’s research and development, business plan or finances. Ensuring that this sensitive data is protected can play a huge role in the future success of the business.

6 key things to consider

Before your small business enters into a confidentiality agreement, some of the factors you will need to consider include:

  1. The parties to the agreement;
  2. What information you wish to be covered by the agreement;
  3. How long you would like the agreement to remain active. Is there an expiration date or does it end when a certain event takes place?
  4. The consequences of a breach of the agreement;
  5. The governing law;
  6. Whether there should be any exclusions to the agreement.

Joe Kafrouni, Legal Practitioner Director, Kafrouni Lawyers

Disclaimer

The information provided by Kafrouni Lawyers is intended to provide general information and is not legal advice or a substitute for it. Small business people should always consult their own legal advisors to discuss their particular circumstances. Kafrouni Lawyers makes no warranties or representations regarding the information and exclude any liability which may arise as a result of the use of this information. This information is the copyright of Kafrouni Lawyers.

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