22 Feb Nondisclosure Agreement

Nondisclosure Agreement

A nondisclosure agreement is a contract, which is also commonly referred to an “NDA,” pursuant to which one or more parties agree not to disclose certain confidential information that they have shared, or intend to share, with each other. The confidential information usually includes company financials, security information such as logins and passwords, information about intellectual property, and other trade secret information. Nondisclosure agreement are typically short and relatively straightforward documents that, unless in very unusual circumstances, are no more than 3-4 pages in length. They are commonly used in the context of startups where founders want to protect business inventions or ideas, particularly when disclosing such ideas to outside independent contractors for the startup company. Some startups also try and get investors to sign NDAs, but most professional investors would have no interest in signing and NDA just to see what the startup might be offering to that investor. Nondisclosure agreements are also commonly used in the cases in which one company is interested in merging with or acquiring another company. In the cases of such business transitions, certain confidential information must be disclosed by the target company to the acquiring company so that the acquiring company can conduct its due diligence and decide whether or not to enter into a letter of intent, and, eventually, purchase or merger documents.