Non-Disclosure Agreement (NDA)

Cognizant Technology Solutions. (26 June 2013). Cognizant quality engineering & assurance summit - Boston. Retrieved from https://www.flickr.com/photos/cognizant-worldwide/9292473096/in/set-72157634650721834 [CC-BY-2.0 (http://creativecommons.org/licenses/by/2.0)], via Flickr

Cognizant Technology Solutions. (26 June 2013). Cognizant quality engineering & assurance summit – Boston. Retrieved from https://www.flickr.com/photos/cognizant-worldwide/9292473096/in/set-72157634650721834. CC-BY-2.0, via Flickr

Buyers and Sellers will often discuss business sensitive areas that are the private domain of the owner. One important protection that helps both parties is a Non-Disclosure Agreement (NDA). Once a Non-Disclosure Agreement is properly executed, both parties can be candid about all aspects of the business. The following data is from an American website—Formswift—that generates legal forms; however, the topics are generic and should be used as a guideline. Refer to legal advice to develop your own document.

A typical non-disclosure agreement should contain the following:

  • Names of all involved parties.
  • Definition of confidential information – List all items of information covered by the agreement, such as vendor lists, financial data, blueprints, etc.
  • Terms – There should be two terms defined in your confidentiality agreement – the time period during which the information must be kept confidential and the time period during which the NDA is binding.
  • Permissible forms of use – Define the way in which signers must treat confidential information, for example: to only discuss it with authorized persons when necessary, or to only use it for official purposes, etc.
  • Exclusions – Clarify what types of information are not confidential. These generally include information that is already known to the public, known prior to the NDA, or disclosed to the signer by another source.
  • Permissible disclosure – List instances, such as court orders or subpoenas, in which signers may disclose protected information.
  • Signatures and dates.

(Formswift, 2014)

Activity: Non-Disclosure Agreement

You can review a sample of a non-disclosure agreement at http://www.foundersworkbench.com/document-driver/.

When considering your non-disclosure agreement, be sure to use legal advice. Consider going to www.youtube.com and search for “small business due diligence.” One of the many available videos is Pacific Business Broker’s Due Diligence: What is it and What to expect. Use this video to augment your research.

Next, we will delve into the types of contracts and agreements that need to be disclosed to a buyer.

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