Non-Disclosure Agreement (NDA)

NDAs, also called confidentiality agreements, are used whenever sensitive information is shared, such as during business negotiations, acquisitions, investments, partnerships and employment.

In an acquisition, potential buyers sign an NDA before receiving detailed information about the target, such as its financial statements, customer lists and contracts. The NDA typically defines confidential information, limits how it can be used, restricts who it can be shared with, sets out how long the obligations last and requires information to be returned or destroyed if the deal does not proceed. It may also prevent the buyer from hiring the target's employees or approaching its customers.

For example, a company exploring the sale of a division might require each interested buyer to sign an NDA before receiving a confidential information memorandum.

NDAs may be one-way, protecting one party's information, or mutual, protecting both. Their enforceability depends on the law of the relevant jurisdiction and on the terms being reasonable. Some jurisdictions restrict NDAs that prevent people from reporting wrongdoing.