China Non-Disclosure Agreements (NDAs) for WFOEs

A non-disclosure agreement (NDA), also known as a confidentiality agreement, is a legally binding contract between two or more parties that outlines how confidential information is to be handled. Typically an NDA will stipulate that information handed over from one party to another can only be used for certain pre-defined purposes and will restrict who can have access to that information. In short, an NDA is the most effective legal mechanism we have for assuring that your sensitive information stays out of the wrong hands. NDAs are commonly signed when two companies or individuals are considering doing business and need to understand the processes used in each others organization for the purpose of evaluating the potential business relationship. A well-drafted NDA can remain in place all throughout the business relationship, providing protection for IP and other legal rights even after the relationship comes to an end. NDAs can be "mutual", meaning both parties are restricted in their use of the materials provided, or they can restrict the use of material by a single party. The great advantage of a unilateral NDA is that it places no legal obligations on one party, usually the party that is disclosing the sensitive information. This is the ideal situation for the disclosing party - all the benefits but none of the obligations - but it is not always a simple task to get the receiving party to agree to this somewhat onerous term.

The best way to understand an NDA is to go through a few typical provisions:
  1. The parties to the agreement (name, address, other identifying information).
  2. The definition of what is confidential, which typically takes the form of a long list of items (i.e.: financial information, customer lists, etc.) and a catch-all phrase to cover anything that’s not explicitly mentioned.
  3. The exclusions from what must be kept confidential.
  4. The term of the confidentiality.
  5. The law and jurisdiction governing the parties.
The recipients’ obligations with regard to the confidential information typically include:
  1. The parties to the agreement (name, address, other identifying information).
  2. The definition of what is confidential, which typically takes the form of a long list of items (i.e.: financial information, customer lists, etc.) and a catch-all phrase to cover anything that’s not explicitly mentioned.
  3. The exclusions from what must be kept confidential.
  4. The term of the confidentiality.
  5. The law and jurisdiction governing the parties.

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Flora Huang is one of Shanghai's leading WFOE lawyers specializing in advising foreign-owned companies. Based in Shanghai, she is regularly consulted by clients from around the world on a wide range of WFOE-related issues. Whether you are in the midst of a legal crisis or just looking to tighten-up your IP protection, Flora and her team are here to help.

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