What is a Non-disclosure Agreement and Why it’s Important

Imagine a hypothetical situation where you are walking into the boardroom of a large corporation with a ground-breaking idea – the only one you have – and you are looking to secure some investment. The process would require you to share specific details relating to your idea.

Do you recognize how this encounter could backfire, should the corporation decide to use your sensitive information against your best interests? To be on the safe side, you should take along an NDA or a non-disclosure agreement to secure commitments that the information you share remains strictly confidential. This same agreement can also secure commitments of confidentiality amongst other related parties, including employees, partners, clients, and vendors.

Non-disclosure Agreement

A non-disclosure agreement is a legal document that protects the confidentiality of any disclosures that you are making about sensitive information, such as the workings of your potential intellectual property or your existing trade secrets. This agreement exists to prevent other parties from disclosing sensitive information to third parties.

A non-disclosure agreement can be the foundation upon which a trusted business relationship rests. A few examples of such protected information may include a secret recipe, a client list, critical formulas that are closely connected to a company’s capacity to keep generating profit, and it may also include accounting figures that are not for the public to see.

Importance to Start-ups

A start-up is generally an idea-centric venture and the protection of the central idea(s) is of paramount importance. Further, because start-ups often do not have the luxury of having abundant resources to pursue a claim in Court should a venture capitalist decide to steal an idea and use it on their own, a non-disclosure agreement is a useful tool for reducing the probability of realizing this risk.

The Making of a Non-disclosure Agreement

A non-disclosure agreement consists of multiple clauses and sections that include (but are not limited to) the confidential information, the parties, the term of confidentiality, the use of confidential information, mandatory and legal disclosure circumstances, arbitration, jurisdiction and a clause on the return or destruction of confidential information that has been exchanged. For a document of such complexity, we recommend you seek the help of a law firm in Alberta such as ours.

Do you need help formulating a non-disclosure agreement for your business interests? Contact us; we law firms in Alberta are here to help you.