When you want to expand your business and when you do network with people, You share many confidential and important information related to your business so that they may get an idea about your stuff and may add value to your business, so whenever you provide anyone with your precious information for whatever purpose it may be, you should ensure it that they should not misuse your information or leak it. Here NDA comes into the picture
NDA means Non-disclosure agreement which states that the signatory will not disclose any data which you are sharing with them
NDA benefits
1. Secure trade secrets - When you are giving some information about your business like some of the trade secrets. You must insure the safety of your information so that it would not go into the wrong hands, that's why you should sign NDA with the opposite party.
2. Communication check – In childhood you may have faced a few situations like, you have told something to your friend and he told that to his friend. this cycle goes on and at the end of the day the information won't come out the same as you told at the beginning. This may happen with your information and negatively portray your business. To avoid this you must do NDA.
3. Information leakage – Information is key for any business. There are a few things because of which your business is doing well. If others will know that, they may copy the same thing and make their own business. Which led to the formation of your possible competitor.
4. Legal action – NDA is Accepted in Indian law. So if you have NDA and proof that the signatory has violated that. You have a right to take legal action against that person or organization.
5. Financial intermediaries – These are the organizations that fulfill the finance-related needs of a company. For that you have to provide the insides of your business-like Business plans, future forecast for 3 years, balance sheets of previous 3 years, p&l information, product information, etc. these are few most confidential information of a company and knowing or unknowing you give this information. If they will shake hands with your competitor, What will you do then? That's why NDA is important.
6. Your employees – you should do NDA with your employees because they already have information like client information, funding information, business knowledge, Sales knowledge, Product knowledge, etc. So, if they quit the job, they may leak that information.
7. Business consultants – consultants are professionals/professional bodies whose job is to advise in different sectors of the business for the betterment of that sector. There are many types of consultants like Sales consultants, chartered accountants, production consultants, process consultants, internal auditors, etc. you should do NDA with them because usually they are working will different organizations. and might be also working with your competitor, if they leak the information, you will suffer a great loss.
8. Manufacturers – You should do NDA with manufacturers like Oem manufacturers who build products with your technology for you for example Foxconn makes products for apple. Just imagine that Foxconn sells information about apple products which is not announced yet and whose parts would be developed by them, to BBK Electronics, which is a competitor of apple in the smartphone market, to avoid this a company should NDA with manufactures.
9. Application and website developer – Just imagine that you have a business idea and it's completely based on a mobile application. so, you have contacted an android developer to develop an app for you. but as soon as you explain your idea to him, he thinks that the idea is nice and why shouldn’t he do a business with that idea by himself only. To avoid this one should do NDA with an application or website developer.
10. Logistics supply providers - Logistics supply providers know the insides of your business like from where raw materials are coming. where you are storing that, where it is manufacturing, where you are exporting, etc. So, it becomes necessity to do NDA with them.
NDA’s Components
1. What is Confidential Information?
You should define What Confidential Information the opposite party should not leak. like it may be financial information, customer information, technology, manpower, tax information, funding information, etc.
2. Receiver details -
Details of the signatory should be there in the agreement.
3. Term and duration-
You should specify in the agreement that till when it is valid. like for how much duration,1 year, 5 years, or more.
4. Use of information
You should make it clear in the agreement what information to use and what not to use.
5. Legal obligation to disclose
You should specify in the agreement in which extreme cases the signatory should disclose the information. For example, they may disclose the information at the time of government inquiry, income tax inquiry, etc.
6. Return of information
You should mention in the agreement that the signatory should return all the files and related stuff after the completion of the term of the agreement.
7. Jurisdiction
You should mention in the agreement which state jurisdiction you will follow in case of the disclosure from the signatory side. It is recommended that you should write your state name so that the signatory should face trouble in traveling and all, if they disclose your information.
8. Remedies
You should mention, how the signatory should act immediately after the discloser. like He should give you an Apology letter, He would block the email to which he have shared the information, would sign NDA with that party to whom they have shared the information so that the information would not be transferred further, even penalty can be imposed.
9. Which party will bear legal fees?
You should make it clear which party will bear the legal fees in case of any discloser. you should put that on the signatory.
Click on the following link to see the template of NDA.
Non-Disclosure Agreement (NDA) - Sample, Template (wonder.legal)