Keeping your business information private

Disclosing confidential business information to others may be unavoidable in order to achieve your commercial aims.

A disclosure situation is likely to arise if you are negotiating with prospective investors, representatives or suppliers or considering the sale of your company.

Confidentiality agreements are commonly used during the process of developing an invention or a new idea, where it is always essential to keep the details secret from competitors before obtaining a patent or design registration. Yet, at the same time, you may need to divulge an extensive amount of information in seeking support to take your initiative forward.

The release of your commercial details could harm your interests if others use them to compete with you, copy your ideas and methods or circulate sensitive information without your knowledge. Legislation limits the unauthorised use or disclosure of certain information but, in many situations, this will not provide you with sufficient protection.

A confidentiality agreement, sometimes called a ‘non-disclosure agreement’, can help you control the use of private information that you release to others. This is a formal legal document that defines your information and requires the recipient to keep it confidential, except under specified circumstances.

Your confidentiality agreement must be drafted to fit your own particular situation but it will usually include clauses that set out:

• the purpose of the agreement, including your reasons for releasing the information to the recipient;
• a description or list of the information that you intend to release and the form in which it will be provided;
• an obligation for the recipient to keep your information confidential and not disclose or use it, except with your permission or for specific purposes;
• a prohibition against the recipient acquiring rights over your information or using it to compete with you;
• a requirement for the recipient to safeguard your information, returning or destroying copies upon request and notifying you of all disclosures;
• a reasonable time period for the agreement; and
• any legal stipulations applicable to overseas initiatives or other circumstances.
• The recipient’s obligations will usually be excluded from information that is:
• generally available to the public, such as your details held by Companies House;
• lawfully in the recipient’s possession already and not subject to existing obligations of confidentiality; and
• required by law to be released, under a court order or legislation, such as the Freedom of Information Act 2000.

Controls should be maintained to ensure that all disclosures are strictly necessary for your purposes and within the terms of the agreement. You will also wish to keep a record of all information released.

If you receive confidential information, you may also be asked to enter into a mutual agreement. This will mean that you will each have to abide by similar obligations.

Enforcement action

If someone does abuse confidential information that you have provided, then as long as your confidentiality agreement has been drawn up appropriately and signed correctly, you may be able to take legal action to enforce it. Where there is a risk of non-compliance, you could apply to the court to order the recipient to observe the terms of the agreement. If you can show that you have suffered loss as a result of unauthorised disclosure, you may also be entitled to claim compensation.

Depending on the situation, a confidentiality agreement may form part of a broader commercial document or process, on which you may require legal advice.

If you intend to allow anyone access to your confidential information, we will be able to advise you on how to protect your interests by avoiding the risk of unauthorised disclosure.

Contact: Robert Goddard