NDAs may not be something that is at the top of your to-do list as the CEO of a new company. However, they are helpful for avoiding unnecessary pitfalls as you grow.
These agreements are critical when building partnerships, exploring new business avenues and scaling a company.
What NDAs Are
Non-disclosure agreements, commonly referred to as NDAs, are a tool for protecting your company’s confidential information. They are a legally binding agreement between parties to not disclose confidential information about the business to other people. Typically, NDAs are unilateral which means only one party agrees not to reveal confidential information about the business.
Why They Are Critical
You should use NDAs to prevent someone from coming in and copying your ideas or disclosing your confidential information before the time is right. Additionally, it sets the tone for the business relationships you enter by showing you are serious about confidentiality.
When to Use NDAs
Anytime you disclose information that you don’t want another party to use or disclose to the public, execute an NDA. This rule of thumb applies no matter who you are sharing information with. Some specific examples of times this would be necessary are when you’re hiring contractors, fundraising, working with manufacturers, and negotiating the sale of the company.
What to Cover in an NDA
It’s important that the NDA makes parties aware of their obligations and the consequences of not meeting them. Key terms should be clearly defined. Your NDA should include:
- A specific definition of what is confidential information and what’s not.
- The responsibilities regarding confidential information.
- A reasonable time period for the confidentiality obligations.
- The process for dispute resolution.
- The legal recourse if someone breaches the agreement.
To learn more answers to the common questions we get around NDAs, check out Episode 017: NDAs: What Are They and Why do They Matter?
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