Canada: Tips For Startups – The Scope And Limitations Of Non-Disclosure Agreements

In an economic climate where information is often a business's primary asset, it is important that companies be able to control the disclosure of key information such as intellectual property, strategic plans, data, research and development, and financial forecasts. The surest way to prevent unwanted disclosure is simply to not share information that you wish to keep confidential, but often times this is not practical and risks stifling business growth. If and when your company decides to share this type of information with an outside third party, entering into a non-disclosure agreement (an "NDA", or sometimes referred to as a confidentiality agreement) prior to sharing the information may help prevent the receiving party from disclosing the information provided. Although an NDA has its place in commercial practice, it does not come without its limitations. For this reason, we suggest relying on an NDA as only one part of your company's practice for keeping key information confidential.

What is an NDA?

An NDA is a contract between two or more parties, with at least one disclosing party and at least one receiving party. The disclosing party is the entity sharing confidential information that they wish to remain undisclosed beyond this arrangement, while the receiving party is the entity receiving the confidential information.

The NDA must define the information that you expect to remain confidential (the disclosing party will prefer a broader definition to protect more information) and the purposes for which it may be used (this should be defined carefully to ensure that the receiving party is not able to use the information for any purpose outside what the disclosing party intends to share it for). The agreement may also set out the particular individuals who are responsible for receiving and controlling the individuals or the "further recipients" with whom they may share the information with. The receiving party and these further recipients may be held responsible for disclosing or using the information outside the terms of the NDA. Depending on the form of information, the parties may also require the receiving party to return the confidential information, or when that is not possible, to destroy it in a commercially reasonable manner.

The agreement will also set out the disclosing party's remedies in case of a breach. These may include monetary damages, injunctive relief, and indemnification for harms caused by the breach. Depending on the information in question, breach of an NDA may cause irreparable damage to the disclosing party. For example, if the disclosed information lands in the hands of a competitor, or otherwise proves unfavorable to the disclosing party once publicly known. Unfortunately, as is the case with contractual breaches, a harmed party would have to go to court to have the breach enforced, which can be costly, time-consuming, and ultimately won't reverse the unwanted disclosure. Much in the same way that IP law can't protect trade secrets, the release of the information itself is what is harmful and it is difficult to undo this damage.

Are NDAs All the Same?

While it may be tempting to use a template NDA or other confidentiality agreement found on the Internet, there are many provisions in confidentiality agreements that should be tailored to the specific business relationship at hand. Using a confidentiality agreement that is suitable for your company's goals and circumstances is imperative to ensuring your key information is not disclosed. The form of an NDA may vary and will depend on the particular situation at hand, for example, will only one party be disclosing information, or both? A one-way NDA is appropriate when only one party (the disclosing party) is sharing confidential information. Mutual NDAs, on the other hand, are useful when all parties to the agreement are sharing confidential information and act as both receiving and disclosing entities, for example, when deciding whether to enter into a joint venture, a partnership, or merge into one entity. The NDA will allow both parties to learn more about each other such that they can determine whether to make the significant decision of merging or entering into a partnership. Both parties will be granted protection under a two-way NDA, and will often be subject to equal restrictions.

Will the information be shared over a period of time or is this a one-time disclosure? The term of disclosure may be important to clarify whether information being shared falls under the protection of the NDA. Additionally, the disclosure term and the period the information is subject to these restrictions are quite distinct timelines. Although the disclosing party may want the information to be held confidential indefinitely, there are some jurisdictions where a court will not enforce this, leaving your company unprotected where you may expect the information to be kept confidential forever.

Is the information being shared for a particular purpose and should you limit the ways in which the receiving party may use the information it receives? It is important to consider your goals for sharing the information and define the boundaries of use accordingly. The purpose of use should be flexible enough to enable the receiving party to use the information as the disclosing party intends, say to evaluate a potential partnership or investment. But is should not be defined so broadly as to allow the receiving party to use the information for any purpose, negating any protection the disclosing party may expect.

Additionally, an NDA may spell out whether and when the information may be disclosed further to a recipient that is not party to the contract. A more flexible limit on "further disclosure" would allow a recipient to share the disclosed information only with those persons within the receiving party's organization, as is necessary to carry out the purpose of the NDA on a strictly "need to know" basis. Alternatively, an agreement may restrict the recipient to sharing the confidential information only with particular persons who are expressly authorized in writing to receive the information. This would suit shorter-term projects with a limited scope.

In certain circumstances, it may be appropriate to include a non-solicit, non-hire, or non-compete provision in the NDA, to restrict the recipient from being able to use your company's information to solicit your company's customers, employees, or compete with your business. If this is not necessary, however, it is not advisable to retain and rely on a provision that a court may find unenforceable

Other Ways to Protect Your Confidential Information

Once confidential information is publicly disclosed, it becomes quite difficult to successfully engage in damage control and prevent the disclosed information from being spread further. This is particularly true where information can be permanently stored and instantly spread over the Internet. While NDAs can be useful in certain situations, we suggest that your company consider these agreements as only one part of its practice to protect key information.

Consider whether and to what extent you are comfortable sharing certain confidential information. There may be circumstances where you do not need to share your "secret sauce" in order to engage in a working relationship, so consider limiting this disclosure to what is truly needed. Many of the clauses that you may include in an NDA may also be set out in other agreements that your company enters into, including employment and independent contractor agreements, licensing and supply agreements, and financing arrangements.

Companies may take precautions internally as well. From instituting shredding policies and requiring certain documents to be stored in locked cabinets to controlling network login in and out of the office. Your company may wish to limit certain information to only those employees who have a need to know the information to perform their job. In certain situations, it may also a good idea to gently remind parties, such as employees or independent contractors, of their confidential obligations to your company from time to time or when the relationship is over. Depending on the form of your company's confidential information, it may be reasonable to perform internal audits of your protective policies and measures and work from these results to increase protection. Finally, certain information may be so important to your company to warrant implementing security policies and precautions or register the company's intellectual property under trademark or patent registration.

Implementing and following security practices that work for your company, in addition to using an NDA when appropriate, will continue to serve your company as it grows and will help to avoid costly litigation and prevent unwanted disclosure of your company's most important information.


If your company is considering disclosure of confidential information to another entity, do not hesitate to take action and get an NDA before parting with any important knowledge. Because of the nuances involved in drafting NDAs, such as utilizing appropriate scope when defining terms, it is important to seek legal advice from your counsel so that your agreement is properly drafted.

The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.

© McMillan LLP 2016

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Morgan T. McDonald
Brandon Deans, Temporary Articled Student
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.