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
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
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
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.
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