NDA / Confidentiality Agreement


Confidentiality Letter and NDA

 

When drafting a confidential letter on behalf of a private equity company, it is important to ensure that the scope of information to be disclosed to "Authorised Recipients" or their equivalent contained in the definition is sufficiently wide.

 

Consider who may need to access to information. You have to consider not only who will need this information initially to evaluate the proposal, but also who would need it if the transaction is successful – including board members and other entities within the group.

 

Does the definition allow the distribution of information to all necessary professional advisers / financiers / investors / potential fund investors / potential consortium members, etc.? This is an area that may cause controversy. Although it is usual for professional consultants to fall within the definition of authorised recipients, information disclosed to third parties, such as potential consortium members, should only be agreed to a separate confidential letter based on such third party. Strict Restrictions Disclosure of named individuals should generally be rejected on the grounds that companies may find it impractical to operate confines and for other internal affairs purposes.

 

Some confidential letters may seek to limit the standard separation of confidentiality undertakings, allowing information disclosure legal requirements or regulations

You should confirm this with the client and don't give in to a more limited part if necessary.

 

A. Liability for Breach of Confidentiality

 

Where the confidential letter imposes responsibility on the client for any Authorised Recipients or equivalent that violates this letter, one will need to decide whether it is willing to acknowledge this in respect of its consultants and advisors (e.g. lawyers and accountants, etc). Responsibility for certain authorized recipients may be refused, and they may be expected to sign separate agreements with the seller or back-to-back agreements with companies. The confidential letter needs to be modified accordingly.

 

Where confidential letter attempts to include all members of the group to subject to restrictions and obligations, this may be unacceptable to larger group companies, where they may not have sufficient. An acceptable compromise It limits the obligation to the group members who receive the information.

 

B. Return of Information

 

Requirements to return all information (including electronic data already save on servers) may be completely impractical. Instead, one may opt for destroying the information instead, or where there are regulatory requirements to keep such information. For the same reason, companies are very reluctant to provide a proof that all information has been returned or destroyed. Where this information is granted, the recipient of the information will generally continue to hold the information retained under the terms of the confidential letter. A compromise may be an agreement to return or destroy using reasonable efforts.

 

C. Communication

 

One should ensure that the confidentiality obligations do not inhibit the ability to conduct due diligence, which needed to be performed and ensure that the list of allowed contacts includes all of these people who need to be communicated.

 

D. Indemnity

 

One should decide whether they are willing to give confidentiality letters of compensation for breach of a confidentiality undertaking. If unable to agree on this point, some potential compromises are: stipulating that a breach of contract must be determined by the court before requiring payment, introducing an obligation to mitigate losses, and ruling out corresponding or indirect losses.

 

E. Guarantee

 

Some confidential letters will seek to limit warranties or believe that all Information disclosure acquisitions should be removed for the purpose of these restrictions.  Confidential letters may prohibit the recruitment of suppliers or targeted employees.

 

F. Termination clause

 

One should include the end date of the confidential letter, and the required three-year term is fairly standard. It is also important that if the proposed transaction is successful, it should ensure that the confidentiality commitment terminates.

 

Where aborted, information regarding the transaction may eventually enter the public domain, and / or no longer has any commercial value. Prior to the expiration of this period, in this case, it is reasonable to agree to continue to keep such information confidential in accordance with the terms of the confidentiality letter.

 

G. Choice of NDA / Confidentiality Letter

 

Members are often confused about which document to use in relation to NDA / Confidentiality Agreement. The following table is a quick reference guide:

 

Documents

When to Use

NDA / Confidentiality Agreement for Business 
(One way / Unilateral) 

One Way Non Disclosure agreement for discussion of a business relationship. It imposes a unilateral obligation of confidentiality on the party who receives the information. It can be in favour of Discloser / Disclosee / neutral.

NDA / Confidentiality Agreement for Transaction 
(One way / Unilateral) 

One Way Non Disclosure agreement for Discloser to reveal details of the Transaction to the Disclosee. It imposes a unilateral obligation of confidentiality on the party who receives the information. Can be in favour of Discloser / Disclosee / neutral.

NDA / Confidentiality Agreement for Business 
(Two way / Mutual) 

Two-way Non Disclosure agreement for discussion of a business relationship. It imposes a mutual obligation of confidentiality on the parties who provide and receive information at the same time. Can choose from strict / neutral / loose obligations even if they are reciprocal.

NDA / Confidentiality Agreement for Transaction 
(Two way / Mutual) 

Two-way Non Disclosure agreement for disclosing details of the Transaction. It imposes a mutual obligation of confidentiality on the parties who provide and receive information at the same time. Can choose from strict / neutral / loose obligations even if they are reciprocal.

NDA / Confidentiality Agreement for Joint Venture 
(Two way / Mutual) 

Non Disclosure Agreement for a basic information exchange agreement applicable where two parties are agreeing to exchange confidential information before concluding a binding joint venture agreement. It imposes a mutual obligation of confidentiality on the parties who provide and receive information at the same time. Can choose from strict / neutral / loose obligations even if they are reciprocal.

NDA / Confidentiality Agreement for Business - Short Form (One way / Unilateral) 

One Way Non Disclosure agreement for discussion of business relationship. It imposes a unilateral obligation of confidentiality on the party who receives the information. This is drafted in short and simple form to procure signing without much negotiation. Can be in favour of Discloser / Disclosee / neutral.

NDA / Confidentiality Agreement for Transaction by Agent (One way / Unilateral) 

One Way Non Disclosure agreement for Discloser to reveal details of the Transaction to the Disclosee by an Agent (e.g. bank or securities firm) of the Principal. It imposes a unilateral obligation of confidentiality on the party who receives the information. Can be in favour of Discloser / Disclosee / neutral.

NDA / Confidentiality Agreement for Business 
(Three way / Mutual) 

Three-way Non Disclosure agreement for discussion of business relationship. It imposes a mutual obligation of confidentiality on the parties who provide and receive information at the same time. Can choose from strict / neutral / loose obligations even reciprocal.

NDA / Confidentiality Agreement for Joint Venture 
(Three way / Mutual) 

Non Disclosure Agreement for a basic information exchange agreement applicable where three parties are agreeing to exchange confidential information before concluding a binding joint venture agreement. It imposes a mutual obligation of confidentiality on the parties who provide and receive information at the same time. Can choose from strict / neutral / loose obligations even if they are reciprocal.

 

Documents
Confidentiality / Non Disclosure Agreement (NDA) for Business (Two way / Mutual)
Neutral
NDA / Confidentiality Agreement for Business (One way / Unilateral)
Disclosee / Receiver
NDA / Confidentiality Agreement for Business (One way / Unilateral)
Discloser / Provider
NDA / Confidentiality Agreement for Business (One way / Unilateral)
Neutral
NDA / Confidentiality Agreement for Business (Three way / Mutual)
Loose / Light
NDA / Confidentiality Agreement for Business (Three way / Mutual)
Neutral
NDA / Confidentiality Agreement for Business (Three way / Mutual)
Strict / Tight
NDA / Confidentiality Agreement for Business (Two way / Mutual)
Loose / Light
NDA / Confidentiality Agreement for Business (Two way / Mutual)
Strict / Tight
NDA / Confidentiality Agreement for Joint Venture (Three way / Mutual)
Loose / Light
NDA / Confidentiality Agreement for Joint Venture (Three way / Mutual)
Neutral
NDA / Confidentiality Agreement for Joint Venture (Three way / Mutual)
Strict / Tight
NDA / Confidentiality Agreement for Joint Venture (Two way / Mutual)
Loose / Light
NDA / Confidentiality Agreement for Joint Venture (Two way / Mutual)
Neutral
NDA / Confidentiality Agreement for Joint Venture (Two way / Mutual)
Strict / Tight
NDA / Confidentiality Agreement for Transaction (One way / Unilateral)
Disclosee / Receiver
NDA / Confidentiality Agreement for Transaction (One way / Unilateral)
Discloser / Provider
NDA / Confidentiality Agreement for Transaction (One way / Unilateral)
Neutral
NDA / Confidentiality Agreement for Transaction (One way / Unilateral) by Agent
Disclosee / Receiver
NDA / Confidentiality Agreement for Transaction (One way / Unilateral) by Agent
Discloser / Provider
NDA / Confidentiality Agreement for Transaction (One way / Unilateral) by Agent
Neutral
NDA / Confidentiality Agreement for Transaction (Two way / Mutual)
Loose / Light
NDA / Confidentiality Agreement for Transaction (Two way / Mutual)
Neutral
NDA / Confidentiality Agreement for Transaction (Two way / Mutual)
Strict / Tight
Cease and Desist Letter
Breach of NDA / Confidentiality Undertaking
Introduction to Non Disclosure Agreements (NDA) and other Confidentiality Agreements
Guide
NDA / Confidentiality Agreement for Business (One way / Unilateral)
Disclosee / Receiver - Short / Simple
NDA / Confidentiality Agreement for Business (One way / Unilateral)
Discloser / Provider - Short / Simple
NDA / Confidentiality Agreement for Business (One way / Unilateral)
Neutral - Short / Simple
Request for Return of Information
Return of Information