What is a confidentiality agreement?

A confidentiality agreement, also known as non-disclosure agreement, is a written document in which the potential buyer agrees to use the information obtained only for the purpose of the business acquisition project. This agreement allows in particular :

➤ Not to disclose the information obtained to a third party
➤ Not to communicate the information obtained to any person other than the professional advising him/her
➤ Except for investment holding and property development, you can work in any business
➤ Not to use the information obtained to harm the company, and to return all the information obtained without keeping any physical or digital copy in case the project fails

By signing the confidentiality agreement, the acquirer generally acknowledges the confidential nature of the information obtained and that the company would be harmed if it failed to meet its confidentiality commitments.

Confidentiality agreements are often used in many businesses where sensitive information must necessarily be disclosed in the course of business, but where, at the same time, the confidentiality of that information is essential (e.g., between employer and employee, between buyer and seller in potential mergers).

Why sign a written confidentiality agreement?

In business life, confidentiality can be essential. New technologies, business strategies, financial data, technical innovations, personal information – many items can be sensitive, especially with respect to competition. In the context of business relationships, this information must often be disclosed, at least in part, to allow for effective negotiation.

Thus, during discussions with a partner, a buyer or a potential investor, it may be imperative to ensure the discretion of an interlocutor. Indeed, a company cannot take the risk that a third party with whom it is negotiating breaks off talks and reveals sensitive information to the competition or uses internal data for its own benefit. Any disclosure can be sanctioned under unfair competition, professional ethics rules, or the various protection regimes offered by intellectual property law, but it is a matter of sanctioning a posteriori an event that has already produced its harmful effects for the company, and this protection is therefore insufficient.

In addition, to protect sensitive data in the most effective way possible, it is strongly recommended to conclude a non-disclosure agreement, otherwise known as a confidentiality undertaking, secrecy agreement or confidentiality agreement. A non-disclosure agreement (NDA), which can also be concluded between legal entities and natural persons, agrees between two parties to keep specific data secret.

When it is unilateral, for example, one party undertakes to the other not to reveal sensitive information that the latter may provide in the case of a confidentiality agreement. While the law protects business secrecy in certain specific contexts, the non-disclosure agreement in the pre-contractual context remains marked by contractual freedom. The duration of the agreement, the scope of the protected information and the persons concerned are therefore in principle free, subject to the terms and conditions of the agreement.

Who is bound by the confidentiality agreement?

Only the parties to the contracts are bound by the confidentiality obligation.

It is advisable for the partners to insert a clause providing for the commitment to ensure that their respective staff members and third parties who come into possession of sensitive information will respect the confidentiality obligations.

On the one hand, the mutual non-disclosure agreement is a confidentiality agreement in which both parties agree not to share the other party’s information. A mutual agreement is when both parties agree to protect each other’s information. For example, two companies entering into a joint venture may require the other party to keep sensitive information about their company strictly confidential.

On the other hand, a unilateral non-disclosure agreement is an agreement in which one party agrees not to disclose certain information to another party. This is the most common form of non-disclosure agreement. For example, a business owner may ask his or her employees not to disclose the company’s trade secrets.

Why download our sample confidentiality agreement?

A non-disclosure agreement, also known as a confidentiality agreement, protects against the use of confidential information. However, its effectiveness depends largely on how well it is drafted. Our non-disclosure agreement allows you to protect all information you share with your partner for any type of activity and including any type of information exchanged, whether oral or written.

In addition, our confidentiality agreement contains specific clauses that give you strong legal protection:

1. Confidential Information Clause: This clause protects you from any information you may pass on to your partner. Thus, a non-exhaustive list has been included in this clause, namely: prospects, customer and supplier information, accounting and financial information, software and data, trade secrets, inventions, business methods, business plans, marketing and sales information, development projects, any other business information.

2. Non-Disclosure Clause: By this clause, we remind the parties that all information must remain strictly confidential and may only be shared with third parties with the written consent of the parties. In addition, the party receiving the personal data must implement internal data protection procedures to prevent disclosure of such information.

3. Intellectual Property Clause: This clause serves as a reminder that the person sharing the confidential information retains ownership of that information. This allows for broader protection within the confidentiality agreement.

4. Return of Information: The party sharing the confidential information may request that the other party receiving the information return any confidential information provided in writing or otherwise and delete it if appropriate.

5. Breach of Contract: Our clause protects the confidentiality of information after the termination or breach of this contract for a specified period of time.

Download your Confidentiality agreement drafted by Lawyers


  Word Document (.docx)

What information can you protect?

There are no restrictions on the type of information that can be protected by a non-disclosure agreement. Indeed, it is up to the parties to decide exactly what confidential information should be covered by a non-disclosure agreement.

In fact, here are some examples of information protected by a non-disclosure agreement:

➤ Customer or consumer databases
➤ Sales and marketing plans or techniques
➤ Schematics of an invention
➤ Unique manufacturing processes
➤ Software, passwords and system specifications

By signing a confidentiality agreement, the parties agree not to disclose or communicate to third parties or the public any confidential information provided to them. Disclosure of confidential information covered by a confidentiality agreement constitutes a breach of contract for which the injured party may seek damages.

Specifically, in a scenario where a new product or technology is being developed, a non-disclosure agreement also protects intellectual property rights (usually patents), which may be nullified by public disclosure of a new invention.

When to sign a confidentiality agreement?

A confidentiality agreement can be entered into as part of negotiations or during the performance of a contract when you consider that sensitive information may be disclosed during negotiations and you wish to protect it.

However, it is advisable to sign a non-disclosure agreement with your partner or client at the beginning of your business relationship to ensure that the other party understands the need to keep the information they receive confidential.

That is why Themis Partner provides you with a sample confidentiality agreement, drafted by Singaporean legal professionals. Moreover, this contract template provided in word format is modifiable and adaptable to any business situation. This sample agreement can be adapted for an individual, a company, an association, or a company under foreign law and a unilateral or reciprocal commitment.

How do you draft your non-disclosure agreements?

Non-disclosure agreements are typically drafted as follows:

1. Define the scope of the agreement:

Definitions of the confidential information to be covered by the NDA, as well as the exclusion of certain information from protection, define the scope of the confidentiality agreement. Both define, in great detail, the categories or types of information that are or are not covered by the non-disclosure agreement.

Generally, the exclusions apply to:

➤ Information obtained from another source
➤ Information generally available in the public domain
➤ Information required to be disclosed by law or other competent authority
➤ Information of which the recipient had prior knowledge
➤ The main characteristics of the parties to the agreement

2. Focus on delineating the obligations of the parties:

The contents of a confidentiality agreement set forth the legal obligations with which the recipient of the confidential information must comply. These obligations define the restrictions and prohibitions on the recipient’s use of the confidential information.

Generally, the confidentiality agreement provides that disclosure of confidential information to selected persons (e.g., employees, agents, officers, representatives, etc.), to whom disclosure is necessary in the ordinary course of business, is permitted. A duty of confidentiality may also be imposed on the recipient in certain confidentiality agreements.

In addition, it is also generally provided that no original or copy of the confidential information shall be retained after the expiration of the term of the agreement.

Why sign a non-disclosure agreement in Singapore?

3. Frame the agreement with time periods:

The terms of the confidentiality agreement and the confidentiality clause are always included in a confidentiality agreement.

The confidentiality clause can extend beyond the duration of the confidentiality agreement but is then usually limited to a period of 3 to 5 years, during which the recipient must not disclose the confidential information that has been communicated to him.

This is how you can prevent your employee from disclosing information or a strategy that you consider vital for the organization and the life of your company, especially if he or she wishes to leave the company.

4. Regulate the operation and effects of the agreement:

Generally, the non-disclosure agreement includes a general provision stating that the agreement does not grant or transfer any rights or licenses to the recipient.

In addition, the agreement may also include other contractual provisions such as: governing law and jurisdiction; limitation of liability; and prohibition of assignment.

How do you protect yourself against a breach of the confidentiality agreement?

If you have signed a non-disclosure agreement and you believe that your company has suffered financial harm as a result of the actions of the recipient of the information, you may be able to bring a claim for damages against the other party.

However, unless you have provided for specific penalties in the content of the agreement, the burden of proof is on you to prove that you suffered a loss of financial revenue or profits as a result of the breach.

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