Most, if not all, businesses have secret information that gives them a competitive edge or expertise in their trading field. Guarding those secret may be essential to conducting their successful business. However, some degree of disclosure is inevitable. Employees will need to be kept in the loop and as the business grows, confidential information may need to be disclosed to potential business partners, suppliers, ex-boarders, clients and financial distributors.
Confidentiality Agreements are used in a variety of fields to ensure that confidential information stays confidential. In these agreements, the recipient of information undertakes to keep it confidential and indemnifies the disclosure against any liabilities and damages they may suffer if the information is disclosed, without authorisation. These agreements may 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 his company's duties. Alternatively, an exchange of confidential information may be mutual which often clears during business negotiations.
Recipients of confidential information are already under some obligation not to disclose those 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 an advantage or cause a corporation detriment. This duty continues even when an employee has left a company under Section 183(1). If the recipient of confidential information breaches these provisions, they are liable to penalties imposed by ASIC.
However, it is not prudent to simply rely on these obligations to protect your business. The elements of civil actions may be difficult to prove. 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 the best protection you should consider then is conducting your business using Confidentiality Agreements.
Confidentiality Agreements are contracts that make both parties aware of their obligations not to disclose information in a non-authorised 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 towered to commit some disclosure which may be needed when professional advice is sought. These agreements often spell out the consequences of unauthorised disclosure. This may make the recipient appreciate the confidentiality of the information and be aware of the liabilities they may face if they fail to meet the obligations they are under.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
