Preparing a Confidentiality Agreement for Review

What is the purpose of a confidentiality agreement?

A confidentiality agreement records obligations concerning the disclosure and use of information in a defined relationship. Its review should start with the proposed transaction or discussion, the information to be shared and the persons who need access. The appropriate terms depend on that context. Signing an agreement does not by itself establish that every disclosure, information-security measure or restriction is suitable.

Identify the disclosure and permitted purpose

Explain why the parties will exchange information and what work each recipient is expected to undertake. A potential acquisition, a software evaluation and a supply negotiation may involve different disclosures and recipients. Describe the information sufficiently to allow the parties to understand the intended protection, without placing confidential content in the initial public enquiry. Consider information already disclosed and how it should be addressed in the document.

Consider who will receive the information

Identify group entities, employees, professional advisers and proposed service providers who may need access. Distinguish practical access requirements from permission to disclose under the proposed wording. Counsel should understand who can control those recipients and what arrangements already govern their work. A broad definition of representatives should not be accepted without considering whether it reflects the way the information will actually be handled.

Examine the obligations and exceptions together

Review the permitted use, disclosure restrictions, care obligations and treatment of information that falls outside the defined protection. Consider how the agreement addresses a disclosure required by law or a competent authority. The relevant wording should be assessed against the actual transaction and applicable law. Do not assume that every provision labelled confidentiality is limited to confidentiality; other restrictions may require separate examination.

Plan for the end of discussions

Explain what should happen when negotiations stop or the permitted purpose is completed. Address the business’s ability to identify and retrieve copies, the position of backups or retained records, and the people responsible for implementation. Consider the intended duration of obligations without selecting a period simply because it appears in another transaction’s form. Information handling after termination needs operational input as well as drafting.

Distinguish confidentiality from ownership and wider restrictions

An agreement may also contain intellectual property terms, publicity provisions, exclusivity, non-solicitation or other restrictions. Identify each separately in the review brief. A disclosure should not be described as transferring ownership unless that is the actual proposal requiring advice. Wider restrictions require their own legal analysis; a familiar agreement title does not make every clause routine or appropriate.

Prepare a concise instruction to counsel

Provide the draft, the proposed disclosure process, the parties and the commercial timetable. For example, a business evaluating an acquisition may need advisers to access a data room while restricting other group companies. That fact should appear in the instruction before the document is revised. Keep a list of unresolved recipient, retention and use questions. The final agreement should be understood by the people expected to comply with it.

References

• Companies Act, 2013 — India Code

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