A non-disclosure agreement in Malaysia is an incredibly important contract at every stage of business operations. It ensures the confidentiality of your business by protecting confidential and valuable business information you share with others.
Non-disclosure agreements aid businesses in maintaining a competitive edge and prevent their former employees, business partners, or rivals from using their confidential information. They are beneficial in various transactions, including onboarding new employees, consulting engagement, and submitting proposals.
What Is a Non-Disclosure Agreement in Malaysia?
A non-disclosure agreement (NDA), also known as a confidentiality agreement, is a written contract between two or more parties to maintain the secrecy of specified confidential information. In Malaysia, NDAs can be standalone documents or part of larger contracts, such as service agreements.
Once signed, an NDA becomes a binding contract. It protects and prohibits the disclosure of confidential information covered by the agreement. This includes all forms of communication: written, oral, electronic, and mechanical.
Some industries require NDAs more frequently than others. You might enter into an NDA whenever confidential information is at stake. For example, two friends starting a business together might use an NDA to protect their discussions and ideas.
The goal of an NDA is to keep trade secrets or proprietary information from becoming known to unauthorised parties or the public. This includes:
- Business strategies
- Trade secrets
- Unpatented innovations
- Marketing strategies
- Product designs and formulas
- Client lists
- Pricing structures
- Development plans
- Other valuable data
The Importance of Non-Disclosure Agreements in Business
NDAs help ensure your trade secrets or proprietary information remain confidential by outlining acceptable terms for handling the material. For instance, they may specify where recipients can store the information and whether they can share it with others who may have access to their systems, such as IT support staff.
These agreements also detail the consequences of rule violations, which typically include fines or legal action. This ensures all parties understand the potential repercussions of unauthorised disclosure.
NDAs are beneficial in various business transactions, including:
- Onboarding new employees
- Engaging consultants
- Submitting proposals
- Protecting business partnerships
By using NDAs, businesses can maintain a competitive edge and prevent former employees, business partners, or rivals from misusing their confidential information.
Read More: Running a Business: 7 Common Types of Contracts in Malaysia
The Types of Non-Disclosure Agreements
Unilateral NDAs
A unilateral NDA allows the party who shares its confidential information (Disclosing Party) to restrict or limit how the other party uses and disseminates the information.
Unilateral NDAs are common in cases where a company is disclosing its business information to employees, clients, investors, advisors, stakeholders, and partners. This is to safeguard confidential information and explain how the recipient (Receiving Party) should handle said information.
Mutual NDAs
Also referred to as bilateral or two-way NDAs, mutual NDAs are agreements between parties involved in a joint endeavour that comprises sharing confidential information. Unlike unilateral NDAs, mutual NDAs enable all parties involved to set restrictions on how the other will share and use their confidential information.
Mutual NDAs are extremely common in mergers and acquisitions, corporate takeovers, and deal-making. This is mostly due to the exchange of tremendous proprietary or confidential business information between parties.
Key Components of a Non-Disclosure Agreement in Malaysia
Parties to the Agreement
Identify and describe all parties to the agreement in detail. With the exception of mutual NDAs, the parties are usually referred to as the “Disclosing Party” and “Receiving Party”.
Definition of Confidential Information
Define “confidential information”. When doing so, it is best to be as specific as possible when describing the scope of such information. In mutual NDAs, the owner of the information should be stated explicitly.
Obligations on Confidential Information (and Their Exclusions)
To precisely outline the information intended to be kept private, how long it should be kept private, as well as when and how the other party may utilise such information. The agreement must also include information that is exempt from the duties of confidentiality.
Effective Date and Duration of the Agreement
The NDA should include a set timeframe or duration of the agreement. It is important to note that some NDAs obligate a party to secrecy for a predetermined amount of time, while others remove the signer’s ability to ever disclose the agreement’s confidential information to anybody.
Read More: 12 Frequently Asked Questions (FAQs) About Contracts in Malaysia
What Should You Do If Your NDA Has Been Breached?
It is critical to take swift action as soon as you learn or suspect that confidential information covered by an NDA has been made public. This is essential in order to acquire reliable proof of how the information was leaked and who is responsible.
The Disclosing Party may suffer irreparable harm, injury, loss, and damage from the breach. In some instances, the extent of the damage may be hard to determine and cannot be fully recuperated with monetary damages.
Thus, the first step is to employ a lawyer. With the help of a professional legal counsel, the Disclosing Party can seek injunctive or other equitable remedies against the Receiving Party as stated by the law.
The Bottom Line
In Malaysia, a non-disclosure agreement is an extremely important legal structure as it protects confidential information and restricts its disclosure to competitors or the general public.
When it comes to trade secrets, there is a lot at stake. Hence, it is important to treat NDAs carefully to ensure any breach or violation can be upheld in court. To safeguard your business, consider engaging an experienced corporate & commercial lawyer.
