There are many reasons why you might want to keep certain information confidential, especially in a business context. Just as you will find confidentiality provisions in employment agreements, you will also find these clauses in a Partnership Deed of Dissolution.

What is considered ‘Confidential Information’?

When your business lawyer is drafting the ‘Confidentiality’ clause, make sure he or she includes relevant examples of the type of confidential information you are seeking to protect. Some of the more obvious examples might include the following types of information and property. This should be a non-exhaustive list in order to gain the widest possible protection:

  • Product and services information, including information about the Business’ actual or proposed software or services;
  • Financial information, including budgets, balance sheets, taxation information, costing and information relating to revenues and profits;
  • Intellectual property and technical information, including trade secrets, know-how drawings, plans, product descriptions and formulas;
  • Any past difficulties experienced between the remaining partner(s) and the departing partner(s) in the Business Partnership;
  • Operational information, including business, organisational structure, activities, operating procedures, policies, products and services; and
  • Anything that relates to business development, client and marketing information, including actual and prospective customer and client lists and marketing plans, collectively, the Confidential Information.

After your business lawyer has drafted this non-exhaustive list summarizing the different types of Confidential Information, the next provision should explicitly prevent the departing partner from using or disclosing any of the listed information in present or future business ventures.

What happens if the departing partner breaches Confidentiality?

Your business lawyer should draft a provision that states that the departing partner agrees to compensate the remaining partners and the business for any loss or damage which may be suffered by the remaining partners or the Business for breach of the confidentiality undertaken in this clause, by the departing partner, including for loss of reputation or embarrassment to the remaining partners or the Business.

There are, however, certain things that a departing partner will not be prevented from disclosing. Your business lawyer should acknowledge these inherent limitations on what is considered Confidential Information in the drafting of the clause. For example, the clause does not apply to any disclosure by a party of information:

  • That is required by law;
  • To that party’s advisors on the basis that such advisors keep the disclosed information confidential; or
  • Where the disclosed information is already known to the recipient or to the public generally.

Finally, a provision that extends these obligations of confidentiality beyond the Termination Date of the Agreement will also be necessary. Have your business lawyer include a notification requirement when a permitted disclosure is to take place. This will ensure that the remaining partners and the business itself are able to take steps to protect the soon-to-be-disclosed confidential information.

Conclusion

The protection of Confidential Information is very important for any business. When employees leave businesses that they have worked with for a long time, there is a relatively good chance that there will be confidentiality provisions in their employment contracts limiting their rights to use and disclose certain information that belongs to the business. The same reasoning applies to partners leaving a partnership.

If you are in need of legal advice relating to the protection of Confidential Information, call LegalVision on 1300 544 755 and speak with an experienced contract lawyer.

Lachlan McKnight

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