Naperville Business Lawyers Talks About How a Non-Disclosure Agreement Can Benefit Your Company

If you are a small business owner, you probably already know that how you approach relationships with other businesses and entrepreneurs is a large part of running a successful business. Ideally, business professionals should always honor handshake agreements. Unfortunately, informal business agreements are not always respected by the other party. This is why it is so crucial that agreed-upon details of business decisions and transactions should be formalized in writing. In many circumstances, a formal non-disclosure agreement, or NDA, can be integral in protecting a company’s professional interests.

What is the Purpose of a Non-Disclosure Agreement?

Non-disclosure agreements, also called confidentiality agreements, are legally-binding documents designed to protect against the dissemination of confidential company information. While NDAs have many uses, they are especially beneficial in pending or proposed business transactions. NDA’s can be a valuable asset during the purchase or sale of a business, a merger, or private financing arrangements. For example, if you discuss the possibility of a merger with another business in your industry, you may wish for this information to stay private. It may not be in your best professional interests to allow news of the merger to reach other companies or the press. In a situation like this, an NDA may be drafted to protect your company from any negative consequences of such a discussion.

One-Way NDA’s Versus Mutual NDA’s

There are two basic types of non-disclosure agreements: One-way non-disclosure agreements and mutual non-disclosure agreements. A one-way NDA, or a unilateral NDA, only bounds one party to confidentiality. One use of a unilateral NDA is to prevent potential investors from divulging your business’s information to other organizations. In this case, you would have no reciprocating requirement to keep the investors’ information private. A mutual NDA is intended to protect the interests of both parties in a business transaction. A mutual NDA is used when distribution of either party’s company information could negatively impact the business or the industry. Companies considering a merger most often use a mutual NDA.

Elements That Should Be Included in an NDA

The most important element in any non-disclosure agreement is the specification of exactly what confidential information is covered under the NDA’s terms. Some NDAs protect trade secrets and product specifics while others cover financial records, long-term capital improvement plans, and more. Another critical element of an NDA is the term for which the protection lasts. Another company cannot remain contractually obligated to your business forever. The duration of NDAs varies, but terms are typically five years or less.

Contact a Naperville Business Law Attorney

To learn more about how a DuPage County business law attorney from the Gierach Law Firm can assist you with a wide range of business concerns, call us at 630-228-9413. Schedule your confidential consultation today.

Sources:

Forbes

Business News Daily