Confidentiality Agreement For Due Diligence Purpose

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The definition of confidential information should be very broad and encompass “all technical, commercial and financial information” and may list certain types of information that the disclosed party should share with the receiving party. The receiving party is generally prevented from disclosing, copying or using the confidential information of the disclosing party for any purpose except in connection with the parties` business transactions. To make the receiving party`s NDA tasty, the disclosed party must normally allow certain exceptions to the above definition and restrictions. In particular, the receiving party will want to extract from the NDA all information that it knew before the receipt of the public part, that is or will be accessible to the public or that has been developed independently of the receiving party. In a typical potential sales process, a buyer makes available to the seller an extensive list of due diligence requests and then follows a large number of additional requests while reviewing the seller`s legal, financial, and operational affairs. To keep the process confidential, the seller usually relies on a small group of employees who have to respond to a buyer`s requests while trying to take care of day-to-day operations. Overall, due diligence can be a tedious and stressful process for the seller. The contracting parties are usually defined in a simple description at the beginning of the contract. If it is an agreement in which a single page provides confidential information, the disclosing party may be designated as the disclosing party and the recipient of the information may simply be designated as the recipient.

The first commitment is that the recipient of the confidential information must keep the information secret. This usually means that the recipient must take appropriate steps to prevent others from accessing it. One reasonable measure could be, for example, to ensure that few people in the recipient`s business have access to the information and that all are informed of the nature of the confidentiality restrictions. Sometimes the NDA effectively sets a standard that the recipient must comply with in dealing with the disclosing party`s confidential information. Most contracts, if they have a duration, have a period of two to five years. But the NDA must also say that, even if the term is over, the disclosing party does not give up any other rights it may have under copyright, patent, or other intellectual property protection laws. Does the information contain personal data? The seller sometimes collects personal data about employees, customers, users and other business partners. Disclosure of this data to a buyer as part of the due diligence process may result in violations of the seller`s privacy policy and applicable data protection legislation. The seller should take care to limit the disclosure of personal data such as social security numbers, driver`s license numbers, credit card numbers, or medical data. Is the information privileged? If the seller has materials developed for legal advice purposes, these materials are privileged and exempt from disclosure in disputes. However, if the information is made available to a potential buyer in the due diligence process, the seller may lose the privilege.

The seller should not provide inside information to a potential buyer without first consulting his or her legal counsel. Finally, it has become common for NDSs to contain a clause allowing a recipient to keep a copy of confidential information for regulatory purposes or in the hands of their external consultant. The disclosing party would of course like to clarify in the NDA that the NDA`s confidentiality and non-use rules regarding information stored in stock are maintained. Prepare very early for the due diligence process: you can never start the preparation too early.. . .