The NDA: protecting confidential information

Before opening the books to an investor, sharing code with a supplier or discussing a partnership, you need a confidentiality agreement — the NDA (Non-Disclosure Agreement). It is the document that turns a verbal promise to “keep things discreet” into an enforceable legal obligation. In Switzerland the NDA is based on the Code of Obligations and, for trade secrets, on the Unfair Competition Act.

What it is really for

An NDA does not physically stop anyone from disclosing information: it serves to make that disclosure a breach of contract, with financial consequences. In practice it gives you three things:

• a clear definition of what is confidential and what is not;
• an obligation not to use and not to disclose the information outside the agreed purpose;
• an evidentiary tool in the event of a dispute, because it puts in black and white what was confidential and from when.

Without an NDA, the general protection against unfair competition remains, but it is more uncertain and harder to prove. With an NDA the perimeter is defined in advance.

One-way or mutual

The first structural choice:

• One-way (unilateral): one party discloses and the other receives. Typical when you present a project to a potential client or investor.
• Mutual: both parties exchange sensitive information. Typical in partnership, M&A or joint-venture negotiations.

Signing a one-way NDA when the exchange is actually two-way leaves one of the parties exposed. It is worth checking this before signing.

The clauses that matter

An effective NDA is not long: it is precise. The elements to always address:

• Definition of confidential information: as concrete as possible (financial data, source code, client lists, know-how, roadmap). Vague definitions are hard to defend.
• Exclusions: information is not confidential if it is already public, already legitimately known to the recipient, independently developed, or lawfully obtained from third parties. Without these exceptions the agreement risks being unenforceable.
• Permitted purpose: the information may be used only to evaluate the transaction, not for other purposes.
• Authorised circle: who may access the data (employees, advisers) and the obligation to bind them to confidentiality too.
• Duration of the obligation: how long confidentiality remains in force, even after the negotiation ends (often 2 to 5 years; for genuine trade secrets, with no expiry as long as they remain secret).
• Return or destruction of the material at the end.
• Penalty clause, applicable law and competent court.

The penalty clause: the real deterrent

Proving the financial damage caused by an information leak is often complicated. That is why an NDA usually includes a penalty clause (Art. 160-163 CO): a lump sum due in the event of a breach, independent of proof of actual damage. Two points to note:

• unless otherwise agreed, paying the penalty does not release you from the confidentiality obligation;
• a manifestly excessive penalty can be reduced by the judge. Better a credible, proportionate amount than a disproportionate figure that will be scaled down.

The limits to be aware of

The NDA is useful, but it does not work miracles:

• it does not protect information that is already public or legitimately disclosed by others;
• it does not prevent the independent development of the same idea by the recipient;
• a perpetual and unlimited confidentiality obligation over everything is hard to enforce: strong protection should be concentrated on what is truly secret.

It should also be remembered that the NDA protects secrecy, not ownership: who owns an invention, a trademark or the code is established through a patent, registration or assignment clauses, not through confidentiality alone. The two tools complement each other.

The most common mistake

Sharing information before signing, “so as not to slow things down”. Once the data has gone out without contractual cover, an NDA signed afterwards protects the past poorly. The correct sequence is: first the agreement, then the sensitive data. This applies especially during due diligence and in the first contacts with investors.

How SIH ONE supports you

The Tax & Legal division prepares one-way and mutual NDAs calibrated to the transaction — with consistent, defensible definitions, exclusions, duration and penalty — and coordinates them with intellectual-property protection and the corporate structure. Before you share data with a partner or an investor, we secure your information.