Non-Disclosure Agreements are most frequently used during employment and in business relationships. However, either party may request one in any situation that requires the receiving party to protect sensitive information.
Some examples of when a company or individual may need to draft a Non-Disclosure Agreement include:
Mergers and business sales
Business acquisitions and mergers usually involve a due diligence phase, when the seller discloses confidential financial and client information to the prospective buyer so the buyer can decide to proceed with the purchase and at what price.
Signing a Non-Disclosure Agreement at the outset can protect the seller's client details, trade secrets, profit and loss statements, and other confidential information from misuse, particularly if the sale does not proceed.
Hiring
Some businesses use Non-Disclosure Agreements during employee onboarding. This is relevant when business matters may be discussed before an employment contract is signed.
Hiring personnel may share sensitive company information, such as intellectual property, marketing strategies, and development ideas, with new staff.
Product development
Inventions and product ideas are sensitive intellectual property. Much of their value relies on confidentiality until a patent can be obtained. You may be at risk of another company stealing your idea and hindering your success. A Non-Disclosure Agreement can prevent investors, product designers, and collaborators from disclosing or misusing sensitive product development plans.