A confidentiality statement can be useful in several situations. For instance, if your employees have access to important company information. Or if you discuss a business idea with an investor or business partner. And, if you share confidential company information with a potential buyer for your company.
What is a confidentiality statement?
A confidentiality statement, also called a confidentiality agreement or clause or a non-disclosure agreement (NDA), is a binding contract. The other party agrees to keep certain information to themselves, and not disclose it. In other words, the other party must keep that information a secret. This enables you to share confidential information.
What does the NDA contain?
A confidentiality statement contains the agreements between you and the other party. You need to lay down at least these points:
- parties: who are the parties involved
- purpose: the purpose of the collaboration between the parties involved
- definition: which information must remain confidential, and which is public
- permissions: to what purpose the parties involved may use the information
- duration: for how long the information must be kept confidential
- consequences: what happens if one of the parties breaches the agreement, for instance a fine or dismissal
- in case of a fine, the amount of the fine
- validation: signatures of the parties involved
Consult a lawyer Drawing up a good confidentiality statement is specialised work. Consider having a lawyer draw up the agreement. It will cost you, but you will be better protected.
Confidentiality statement employee
For employees, a confidentiality statement is usually part of the employment contract, not a separate contract. If an employee does not uphold the confidentiality agreement, it is grounds for dismissal. Even if an employee leaves your company, the confidentiality statement still stands.
Confidentiality statement investor or business partner
Do you have an idea or invention, for which you need money
? Sharing confidential information with a potential investor can be risky. If you haven’t patented your idea
yet, your investor or business partner might steal your idea. A confidentiality statement protects you against that risk.
Protect your idea
You can protect your idea or invention. By taking out a patent, you can stop others from copying, selling or implementing your invention.
Confidentiality statement potential buyer of your company
If you are planning on selling your business and have found a potential buyer, you will have to provide confidential information in your memorandum of sale
; for instance, your profit rates and prognoses. By making the potential buyer sign a confidentiality statement, you ensure that this information stays confidential. If the information that your company is for sale is also confidential, be sure to put it in the confidentiality statement.