Affiliate - NDA Provision

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Overview

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Part of the “who can I share it with” phase of an NDA, you will often see inhouse counsel fussily specifiying, then laboriously defining the affiliated companies in the receiver’s group who the receiver is entitled to share the information.

This is all essentially overkill, for the reasons we get into below.

Summary

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The definition

For one thing, laboriously defining “affiliate” is overkill since it is very well understood and in most sensible jurisdictions defined under company law statutes and, for good measure, in market-standard agreements like ISDA, in any case.

Is “affiliate” the right measure?

It is a kind of obsession amongst a certain kind of legal eagle — usually, the same sort that will hotly insist on a counterparts clause — that one specify in elaborate detail which, or which sorts of, affiliate may have possession of the discloser’s innermost secrets.

The JC has never really understood this. A degree of control over another legal entity is surely an arbitrary marker which has nothing at all to do with one’s “purpose”, which one will have spent some time and intellectual energy explaining. Let that be your guide. For why should it make a difference that the person to whom you want to share the discloser’s good oil happens to be employed by a >51% related, or co-controlled, or parent or child — go on, shoot me — company?

If you sensibly contain the “purpose” and get your “permitted disclosees” right — namely those with a legitimate need-to-know the confidential information and who accept it with an equivalent degree of confidence, and for whom the contracting principle remains responsible, should they violate that confidence — then it really doesn’t matter if they are affiliates or not.

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• The JC’s famous Nutshell™ summary of this clause

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See also

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