What is a confidentiality agreement?
Most, if not all businesses have secret information that gives them a competitive edge or expertise in their trading field. Guarding these secrets can be the trick to conducting a successful business. However some degree of disclosure is inevitable.  Employees need to be kept  in the loop and as your business grows confidential information may need to be disclosed to potential business partners, suppliers, exporters, clients and financial distributors.

Confidentiality agreements are used in a variety of fields to ensure that confidential information stays that way. In these agreements the recipient of information undertakes to keep quiet and indemnifies the discloser against any liabilities and damages that they may suffer if the information is disclosed without authorisation. These agreements can operate in a one way fashion. For example an employer may disclose confidential information to an employee who is under an obligation not to disclose this information outside of his company duties.  Alternatively, an exchange of confidential information may be mutual which often occurs during business negotiations.

Basic Protection:
Recipients of confidential information are already under some obligations not to disclose these secrets. Section 183 of the Corporations Act 2001 (Cth) provides a civil obligation that any person who obtains information in their capacity as a director, officer or other employee must not improperly use this information to gain advantage or cause a corporation detriment. This duty continues even when an employee has left a company under s 183(1). If a recipient of confidential information breaches these provisions they are liable to penalties imposed by ASIC.

However, it is not wise to simply rely on these obligations to protect your business. The elements of civil actions may be difficult to prove. Don’t forget that going to court is also expensive and time consuming. By the time you obtain a remedy your company secrets may have already been leaked and the damage to your commercial interests may have been done. So for the best protection you should consider conducting your business using confidentiality agreements.

What are the advantages of a confidentiality agreement?
Confidentiality agreements are simple contracts that make both parties aware of their obligations not to disclose information in an unauthorised manner. It is a lot easier to enforce a breach of contract in a court than other actions. Another benefit is that confidentiality agreements can be tailored to permit some disclosure which may be needed when professional advice is sought. These agreements often spell out the consequences of unauthorised disclosure. This will make the recipient appreciate the confidentiality of the information and aware of the liabilities they may face if they don’t keep their mouth shut.

Where I might need a confidentiality agreement?
Confidentiality agreements can be made with employees, business partners, associates, research academics and third parties to name a few. Where information is patentable or of potential commercial value it should be classed as confidential. Even client and customer lists may need to be protected.

For these agreements to be effective, they need to be carefully drafted. Information that is confidential should be accurately defined and the obligations of the parties need to be clearly outlined. Further the jurisdiction, duration and consequences of disclosure must be included. Rest assured, at Law Central we have done this for you! You can conduct your business transactions and activities with piece of mind knowing that your company secrets will remain that way.

Case Study:  Platinum members read on to see how breach of confidentiality pans out on the corporate battlefield…

Should I take any other precautions?
By adopting some simple business practises, you can minimise the risk of company secrets being leaked. It may be wise to impose requirements that information must be returned or destroyed as soon as the purpose for disclosure has been achieved. It never hurts to keep tabs on who knows what and when.

Confidential information is often the key to your businesses success. So to protect your company from losing its competitive edge make sure you have a Confidentiality Agreement in place. Click here to Build a Confidentiality Agreement online.