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Managing Confidentiality in Transactions and Business Activity


Managing Confidentiality in Transactions and Business Activity

As your company engages in its ordinary course of business activities, considers new investments, or engages in strategic transactions, confidentiality is of the utmost importance. It’s important to not only protect your own confidential information, but also minimize the risks associated with the possession another party’s confidential information.

Whether you are running an asset sale process, considering a purchase or evaluating a service provider, you likely will have to disclose nonpublic information about your business (e.g., intellectual property, business practices, customer-related information or trade secrets) and you want to be sure that you have taken reasonable measures to protect it.

How do you best protect that information? There are different types of confidentiality agreements depending on the intended use. Non-disclosure agreements (NDAs) for strategic transactions will frequently include restrictive covenants such as standstills and non-solicitation provisions. Restrictive covenants should be addressed in a consistent and uniform manner and should take into account the requirements of your business. 

Real estate NDAs present their own set of issues given the varied combinations of assets that they may involve. Some will also include restrictive covenants that may affect how your company conducts its business. NDAs with vendors or advisers will have different confidentiality implications depending both on the nature of the potential relationship and the confidential material that will be disclosed or exchanged. Certain NDAs will continue in effect for the life of the relationship. In such cases, you will want to ensure that any changes in the relationship between the parties is accounted for.

Certain relationships require mutual confidentiality obligations. In those cases, reciprocity may require compromise, but should not require you to relinquish the protections your company requires.

Having a better understanding of the market and the ways that companies need to be flexible in order to get past threshold matters, like confidentiality, will help you to put the required agreements in place promptly and in a cost-effective way. You should also work to understand the constraints that your counterparties may be under due to the nature of their business or their corporate or institutional structure. An asset sale process can be done more efficiently using a standard set of guidelines tailored to your company’s individual needs, but the guidelines should consider and offer alternative resolutions to accommodate different types of recipients and the needs of their legal and compliance departments.

On the other hand, your business activities may involve evaluating material provided by other parties who will demand confidential treatment. When receiving confidential information, your company should negotiate acceptable terms appropriate to your institutional needs, business practices and reporting or regulatory oversight obligations. In particular, your company’s standards policies and practices should be reflected in your compliance obligations.

Almost as important as negotiating an NDA that meets your company’s needs is making sure to establish appropriate procedures to track and comply with the obligations that arise from such agreements. You should work with your advisers to establish records retention policies concerning confidentiality agreements and corresponding documents or information. Records should be kept current to help establish relevant dates in the event of a dispute in connection with the agreement.

Whether you have an established confidentiality practice or are just getting started, it is a good practice to prepare a confidentiality agreements playbook. Developing a standard manual or playbook will enable you to address recurrent issues in a consistent manner and save you time and expense. A clear and reasonably detailed playbook is also useful when the persons that usually handle the matter are unavailable. Most importantly, a playbook helps to retain institutional knowledge and consistency for your company as stakeholders turn over.

Your team of advisers can help keep you up to date on market practices so you can avoid accepting unreasonable agreement terms or being intimidated by unenforceable restrictions.

For more information, please contact the Barnes & Thornburg attorney with whom you work or Frances Rivera-Medero at 646-746-2029 or frivera.medero@btlaw.com.



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