smallbusiness.co.uk: Helping your business think big

At some stage in the life of your business, you’ll need to divulge information to third parties about your business, so it’s a good idea to take steps to ensure the information you share remains confidential.

Whether you’re pitching for new business or negotiating a contract, the information you are giving others about your business is likely to be commercially sensitive and could harm your company if it fell into the wrong hands. This is where confidentiality agreements can protect you.

Confidentiality agreements (sometimes called non-disclosure agreements) are legal documents that protect sensitive information and ensure anyone party to this information agrees on acceptable uses. The people involved in a confidentiality agreement might be your shareholders, suppliers, investors, potential purchasers of your business or perhaps even your own staff members.

Confidentiality agreements are not just concerned with protecting inventions or revolutionary new products. An agreement of this type can be used to protect technical details about your company, such as systems and protocols, and also financial information and business strategies.

Both parties ought to consider carefully what information to include or exclude from an agreement in order to ensure it can be realistically adhered to, is not excessively prohibitive, and limits the possibility of anyone breaking the agreement unintentionally.

The agreement should specify a start and end date, usually spanning a matter of years, and include the obligations of each party to protect use of confidential information. For instance, the agreement may specify that all sensitive paperwork be stamped as ‘confidential’ and it what ways any of it may be reproduced. Reference may also be made to the storage and disposal of such confidential information during the period of the agreement and after it has expired.

When compiling an agreement it is likely that you, the party disclosing the information, will want the agreement to be more stringent than the party you are working with. Therefore, you should expect to have to negotiate the terms of the agreement quite carefully, which will be time well spent in the long run.

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