Glossary - Non-Disclosure Agreement (NDA)
A Non-Disclosure Agreement (NDA) is a legal contract between at least two parties that outlines confidential materials or knowledge the parties wish to share with each other for certain purposes, but wish to restrict access to or by third parties. It creates a confidential relationship between the parties to protect any type of confidential and proprietary information or trade secrets. As such, an NDA protects non-public business information.
Also known as
- Confidentiality Agreement
- Secrecy Agreement
- Proprietary Information Agreement
Use cases examples
- Employment Agreement: As part of the employment agreement, the employee agrees not to disclose or use any of the company's confidential information, other than for the benefit of the company.
- Partnership Deal: Before starting discussions on a potential partnership, both companies sign an NDA to ensure that any shared business plans, customer lists, or technology details remain confidential.
Considerations for investors
- Before signing an NDA, assess the confidential information to determine if it's critical for due diligence and if the restrictions are reasonable in scope and duration.
- Ensure the NDA does not hinder the ability to make investments in other companies in the same sector by being too broad or restrictive in defining what constitutes confidential information.
Considerations for founders
- Ensure the NDA does not overly restrict the company's ability to operate or share necessary information with potential partners, investors, or employees.
- Consider the duration of confidentiality obligations; they should be realistic and not indefinite, to avoid potential legal complications or challenges.
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