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Unilateral NDA

Definition - What does Unilateral NDA mean?

A unilateral non-disclosure agreement (NDA) is a legal document used by one entity when it wants to safely share confidential information with another entity, usually for the purposes of an M&A transaction. This agreement makes it convenient for the sharing entity to disclose any and all proprietary information with the recipient, and the latter is bound to keep it private from others.

Divestopedia explains Unilateral NDA

A unilateral non-disclosure agreement allows information to be confidentially shared between the two entities. This information can be anything such as financial statements, business plans, documents, designs and trade secrets. Before sharing any such private information, an NDA is signed between the two parties to ensure confidentiality of proprietary information. This confidential information can either be disclosed in writing and marked as confidential or can be summarized and designated as confidential through a written memorandum that is delivered to the recipient within 30 days from the date of signing the NDA.

From a recipient's perspective, the information disclosed should be solely used for the purpose of evaluation or any other purpose as agreed upon by both parties. If the recipient is a firm, then it should not disclose the information to anyone else except its own directors, officers, authorized partners or employees who need to know this information in order to complete their work effectively. Also, it is the responsibility of the recipient to ensure that the entities with whom this information is shared do not disclose it to others. While it may not have total control over the actions of others, the recipient must take adequate measures to ensure that the information is not disclosed to unauthorized parties in order to satisfy its responsibility to the seller.

However, the recipient will be absolved of its responsibility should any of the following situations occur:

  • The information reaches the public of no fault of the recipient;
  • A third party gets the same information through a different source that is not part of the NDA;
  • Any information is independently created or developed by the recipient and does not include any information taken from the sharing entity; or
  • It is disclosed to any third party with the explicit consent of the disclosing entity.

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