Defines who may receive confidential information on behalf of the receiving party, including employees, contractors, advisors, and other agents. Establishes need-to-know requirements and responsibility for representatives' actions.
A Representatives clause defines who, besides the receiving party itself, can access confidential information. In business, companies do not operate in isolation - they need employees, lawyers, accountants, consultants, and other advisors to evaluate deals and make decisions. This clause creates the framework for permissible disclosure to these individuals.
The clause typically serves three purposes: (1) defining who qualifies as a "Representative," (2) establishing conditions for disclosure (such as need-to-know and confidentiality obligations), and (3) allocating responsibility when Representatives breach the agreement.
Getting this clause right is critical. Too narrow, and you cannot operate effectively. Too broad, and confidential information spreads beyond control.
⚠
Why This Clause Matters
Practical Necessity: No company evaluates major transactions alone. You need legal, financial, and technical advisors. Without a Representatives clause, you might technically breach the NDA by sharing with your own lawyer.
Risk Allocation: The clause determines who is liable if a Representative leaks information. Are you strictly liable for their breaches, or only for failing to exercise reasonable care?
Operational Flexibility: Broader definitions provide more flexibility but increase risk. Narrower definitions reduce risk but may require consent for routine disclosures.
Contractor and Consultant Coverage: Many companies rely heavily on independent contractors. Whether they qualify as "Representatives" significantly impacts day-to-day compliance.
Need-to-Know Requirements: Most clauses limit disclosure to those with a "need to know." The strictness of this requirement affects how information flows internally.
👥
Common Categories of Representatives
Employees: Almost always included; may be limited to those with need-to-know
Directors and Officers: Typically included for corporate governance purposes
Legal Counsel: Usually included, both in-house and external
Representatives
1. Definition. For purposes of this Agreement, "Representatives" means, with respect to a party, such party's directors, officers, employees, agents, attorneys, accountants, financial advisors, consultants, and other professional advisors who (a) have a need to know the Confidential Information for the Purpose, and (b) are bound by confidentiality obligations no less protective than those contained in this Agreement.
2. Permitted Disclosure. The Receiving Party may disclose Confidential Information to its Representatives solely to the extent necessary for the Purpose. Prior to any such disclosure, the Receiving Party shall inform its Representatives of the confidential nature of the information and the obligations under this Agreement.
3. Responsibility. The Receiving Party shall be responsible for any breach of this Agreement by its Representatives and agrees to take all reasonable measures to ensure its Representatives' compliance with this Agreement. Any act or omission by a Representative that would constitute a breach of this Agreement if taken by the Receiving Party shall be deemed a breach by the Receiving Party.
4. Affiliates. The Receiving Party may disclose Confidential Information to its Affiliates and their Representatives, provided that (a) such disclosure is necessary for the Purpose, (b) such Affiliates and their Representatives are bound by the terms of this Agreement or confidentiality obligations at least as protective, and (c) the Receiving Party remains fully responsible for any breach by such Affiliates or their Representatives. "Affiliates" means any entity that controls, is controlled by, or is under common control with the Receiving Party.
Note: This balanced version includes standard professional advisors, requires need-to-know and confidentiality obligations, extends to affiliates with appropriate safeguards, and makes the receiving party responsible for Representatives' breaches.
Representatives
1. Definition. "Representatives" means, with respect to a party, such party's directors, officers, employees, members, partners, agents, attorneys, accountants, financial advisors, auditors, consultants, contractors, subcontractors, technical advisors, and any other persons or entities engaged by such party to provide services related to the Purpose.
2. Permitted Disclosure. The Receiving Party may disclose Confidential Information to its Representatives as it deems reasonably necessary or appropriate for the Purpose. The Receiving Party shall use commercially reasonable efforts to inform such Representatives of the confidential nature of the information.
3. Representative Obligations. The Receiving Party shall require its Representatives to maintain the confidentiality of any Confidential Information disclosed to them. Such requirement may be satisfied by (a) an existing employment, consulting, or professional engagement that includes confidentiality obligations, (b) the Representative's professional ethical duties (in the case of attorneys, accountants, or other licensed professionals), or (c) a separate confidentiality agreement.
4. Responsibility. The Receiving Party shall use reasonable efforts to cause its Representatives to comply with this Agreement. The Receiving Party shall be liable for any breach of this Agreement by its Representatives only to the extent the Receiving Party failed to exercise reasonable care in selecting, instructing, or supervising such Representatives.
5. Affiliates and Financing Sources. The Receiving Party may, without the prior consent of the Disclosing Party, disclose Confidential Information to:
(a) any of its Affiliates and their respective Representatives;
(b) any bona fide potential financing sources, including banks, lenders, and investors, and their Representatives; and
(c) any potential joint venture partners or co-investors and their Representatives,
provided that such parties are bound by confidentiality obligations at least as protective as those in this Agreement.
Why this favors the recipient: Broader definition including contractors and subcontractors, discretion over what is "reasonably necessary," existing professional obligations satisfy the requirement, limited liability (only for negligence in supervision), and automatic inclusion of financing sources and potential partners.
Representatives
1. Limited Definition. "Representatives" means only such party's employees and in-house legal counsel who (a) have a direct and demonstrable need to know specific Confidential Information for the express Purpose set forth in this Agreement, and (b) have executed confidentiality agreements in the form approved by the Disclosing Party.
2. Prior Consent Required. The Receiving Party shall not disclose any Confidential Information to any person other than its Representatives as defined above without the prior written consent of the Disclosing Party in each instance. This includes, without limitation:
(a) outside legal counsel, accountants, or financial advisors;
(b) contractors, consultants, or independent advisors of any kind;
(c) Affiliates, parent companies, or subsidiaries; and
(d) potential financing sources, investors, or partners.
3. Request Process. Any request for consent to disclose to additional parties shall be submitted in writing at least ten (10) business days prior to the proposed disclosure and shall include: (i) the identity and role of the proposed recipient, (ii) the specific Confidential Information to be disclosed, (iii) the purpose of the disclosure, and (iv) a copy of the confidentiality agreement to be executed. The Disclosing Party may grant, withhold, or condition its consent in its sole discretion.
4. Strict Liability. The Receiving Party shall be strictly liable for any breach of this Agreement by any person to whom it discloses Confidential Information, whether or not such person qualifies as a Representative hereunder. This liability shall apply regardless of whether the Receiving Party exercised care in selecting, instructing, or supervising such person, and regardless of whether the disclosure was authorized under this Agreement.
5. Indemnification. The Receiving Party shall indemnify, defend, and hold harmless the Disclosing Party from and against any and all claims, damages, losses, costs, and expenses (including reasonable attorneys' fees) arising from or related to any disclosure of Confidential Information to any Representative or other person.
Warning - This clause is highly restrictive: Extremely narrow definition (employees and in-house counsel only), requires discloser-approved confidentiality forms, prior written consent needed for outside advisors, strict liability for any breach regardless of fault, and includes broad indemnification. This may be impractical for most business transactions.
💡
Key Considerations
1
Ensure Practical Workability: Before signing, map out who will actually need access to the information. If key advisors are not covered, you will need to either negotiate broader coverage or seek consent for each disclosure.
2
Understand the Liability Standard: Strict liability means you are responsible for Representatives' breaches regardless of fault. A negligence standard (only liable if you failed to exercise care) is more protective for the receiving party.
3
Address Contractor Coverage: Many companies rely on contractors for core functions. If contractors are excluded, you may need to seek consent repeatedly or risk breach.
4
Pre-Existing Obligations: For professional advisors (lawyers, accountants), their professional ethical rules already impose confidentiality duties. A reasonable clause should recognize this.
5
Need-to-Know Standard: This is generally accepted but be careful about how strictly it is defined. A hyper-strict need-to-know requirement may impede efficient internal communication.