Confidentiality Agreement

What is a Confidentiality Agreement?

A confidentiality agreement (or a non-disclosure agreement) is a binding contract between a company and a prospective investor whereby the investor agrees to keep confidential any sensitive information shared during discussions about a potential investment.

It's typically used at the start of a capital raise, before detailed discussions, due diligence, or information sharing take place.

Why is this important?

Social enterprises seeking investment will typically need to share commercially sensitive information with prospective investors including financial statements, business plans, impact methodologies, beneficiary data, and program designs.

Without a confidentiality agreement in place, it may be significantly more difficult to enforce confidentiality obligations against the investor. While other legal protections may exist in certain circumstances, a signed agreement provides the clearest and most enforceable basis for protecting your information.

How does this document fit alongside the other Toolkit documents?

The typical sequence is:

Why is this a one-way obligation?

This template is drafted as a one-way obligation, which is common for a capital raise.

It reflects the typical scenario where the Company discloses sensitive information (such as financials, impact data, and business plans) to enable the investor to assess the opportunity, without receiving equivalent information in return.

A mutual (two-way) Confidentiality Agreement is more appropriate where both parties are sharing commercially sensitive information, such as in a joint venture or collaboration.

Duration of the confidentiality obligation

What can the Company do if there is a breach?

If a prospective investor breaches (or threatens to breach) the agreement, the Company may seek a court order requiring the investor to stop the breach immediately.

This is a particularly important remedy, as once confidential information is disclosed, the harm may not be adequately addressed by monetary compensation alone.

The remedies under this agreement are in addition to any rights the Company has under law or in equity. This means the Company may seek an injunction as well as claim damages.

What if an investor won't sign?

A Confidentiality Agreement is generally recommended before sharing sensitive information. However, there are some practical considerations to be aware of.

Some investors assess a high volume of deals and may have limited appetite for negotiating a bespoke Confidentiality Agreement. In those cases, consider whether the investor's own standard-form agreement provides adequate protection (some investors also may require a mutual Confidentiality Agreement to protect confidentiality of discussions, even if the majority of information will flow from the Company), or whether a simplified version of this template would be acceptable to both parties.

If the investor declines to sign, you are not legally prevented from sharing information, but you should carefully consider the risks of doing so without binding confidentiality protections in place. Without a signed agreement, it may be significantly more difficult to enforce confidentiality if a dispute arises.

As a practical approach, consider:

• Limiting initial disclosures to general, non-sensitive information (e.g. a high-level pitch deck) until a Confidentiality Agreement is signed
• Asking the investor whether they have a standard-form Confidentiality Agreement they are willing to sign
• Reserving detailed financials, IP documentation, and beneficiary data until a signed agreement is in place