Mastering NDA Compliance – Steering Clear of Pitfalls
Non-Disclosure Agreements are a bedrock of business relationships, providing assurance that sensitive information remains safeguarded. Having an NDA in place is just the start - compliance procedures need to be established as well. As companies engage in numerous transactions, the volume of NDAs can become overwhelming, creating critical challenges for compliance management. Let’s delve into the most common NDA compliance pitfalls and the practical solutions to navigate and master them successfully.
Non-Disclosure Agreements (NDAs) are a bedrock of business relationships, providing assurance that sensitive information remains safeguarded. Whether a potential investment, joint venture, service/employment relationship, and many more, an NDA or confidentiality provision is almost certain to make its way into the onset of the relationship. Having an NDA in place is just the start – compliance procedures need to be established as well.
As companies engage in numerous transactions, the volume of NDAs can become overwhelming, creating critical challenges for compliance management. Let’s delve into the most common NDA compliance pitfalls and the practical solutions to navigate and master them successfully.
Track Information Diligently
A major pitfall lies in losing track of the information shared under an NDA. Both the discloser and recipient must internally document the data accessed to prevent inadvertent mingling, loss, or misuse. To maintain confidentiality and facilitate compliance, centralizing information storage, categorizing data based on deals, and encouraging individuals involved to use restricted-access folders are effective strategies.
For the discloser, diligently tracking information shared to recipients warrants an additional layer of protection. Taking notes during meetings and calls further ensures a clear record of shared information, especially for sensitive data like trade secrets.
Avoid Unnecessary Outreach
Unrestricted outreach can lead to compliance issues, potentially sharing confidential information with competitors or numerous recipients with limited interest. Effective NDAs allow recipients to share information with specific third parties linked to the deal. Limiting internal and external disclosure only to essential deal team members is key. Implementing procedures to restrict access and dissemination within each party involved is a practical approach to minimizing risk.
Stay Mindful of Terms, Renewals, and Automatic Triggers
To prevent crucial dates and milestones from slipping through the cracks, it’s essential to organize and track contractual deadlines diligently. Both recipients and providers must be aware of the agreement’s duration, material destruction deadlines, automatic renewals, and basic confidentiality and non-use terms. Setting up scorecard systems, compliance calendars, and automatic reminders post-signing ensures proactive management of these dates and helps to facilitate appropriate actions to be taken.
For example, some NDAs may have automatic triggers for material destruction upon NDA expiration, requiring proactive tracking to avoid any surprises down the road. Disclosers must also stay vigilant about term dates to avoid unprotected disclosures or missing deadline dates for providing notice to recipients, such as requesting information destruction.
Remember Related Restrictive Covenants
Beyond confidentiality and non-use restriction covenants, NDAs can encompass other obligations. These may include non-solicitation, no contact restrictions with customers or suppliers, non-circumvention provisions with respect to the transaction, and standstills for acquiring securities and assets. Neglecting these restrictive covenants can lead to compliance nightmares if unintentionally breached. To mitigate this risk, maintaining comprehensive records and sharing awareness with relevant departments, such as commercial and HR, is a prudent practice.
Proactively addressing compliance pitfalls in NDAs is essential for building and preserving successful business relationships. By diligently tracking information, limiting unnecessary outreach, managing key dates, and remembering related restrictive covenants, companies can navigate the NDA landscape with confidence and safeguard their sensitive information effectively.
Learn more about the benefits of outsourcing legal contracts and how to unlock the potential for your business to thrive in a highly competitive marketplace with Sterlington’s Legal Outsourcing Services.
What will the law firm of the future look like?
Time travellers from 100 years ago would find the modern law firm a curious beast: On the one hand, litigators spend their days preparing pleadings and giving oral argument in court; transactional lawyers spend their days preparing and reviewing contracts, deeds and agreements. Lawyers in 2023 do pretty much the same thing. On the other hand, the way in which that work is carried out is radically different. Law firms are increasingly diverse, and no longer the sole province of the most privileged in society. And instead of doing everything by hand, or dictating to clerical staff, lawyers are expected to be adept with a range of different tech tools.
Sterlington Welcomes Todd McClelland as Partner in Data Privacy, AI and Litigation practices
Sterlington, an international law firm, is pleased to announce the appointment of Todd McClelland as a Partner in Sterlington’s Cybersecurity, Data Privacy, AI and Litigation practices. As a recognized leader in cybersecurity and data privacy, Todd’s expertise will strengthen Sterlington’s capabilities in these strategic areas of focus for the firm.
What Is an NDA? Everything About Outsourcing NDAs
Interested in learning more about non-disclosure agreements? Explore our comprehensive guide to NDAs and why outsourcing your NDAs is the ideal option