A Non-Circumvention Non-Disclosure Agreement, or shortened, an NCNDA is the document everyone will encounter while working with PPE. The main function of this agreement would be to keep the competing brokers at bay, guarantee the confidentiality of sensitive documents exchanged and to bind a seller or a buyer to pay commission to all the middlemen participating in the deal. This itself is not a nefarious document, however there are certain things you need to keep in mind before signing an NCNDA.
There is a level of uncertainty surrounding these documents, whether they give you any legal protection or not. In most cases this depends on the text of the document: if it is written by a professional lawyer and it is not just something downloaded from the internet, it certainly does have a legal binding power. However, in most cases brokers are just copying each others NCNDA, or use a free template with the International Chamber of Commerce’s logo on it. (I am still not sure whether this is an actual template from them… at least, I could never find the original of it on the ICC’s website.)
When it comes to NCNDAs, my advice usually is to ask your lawyer to perpare one for you. This way you enjoy a real legal protection. I know it is not cheap, but it gives you a peace of mind that you are legally protected.
Why is an NCNDA a good thing?
Beside the legal protection, there is another advantage of an NCNDA – you can determine the length and composition of a broker chain with them. I know this sounds funny, but it is usually the only benefit we have from them. Since it is crucial to all brokers to sign the agreement, you can easily check how many signatures are present, and who these middlemen are. For example: usually the seller or the buyer is also present on the NCNDA – if you don’t know the identity of the company at this point, you have it now in your hands and you can make due diligence. Also, if you see way too many brokers (often under the title “facilitator” “intermediary” etc.), you better leave. The more brokers, the less chance of success.
The evil side of these documents
What can go wrong if I sign this agreement? – many people ask. Well, there are some malevolent ways to use the data from an NCNDA:
- Procuring information – since in most cases the buyer and the seller signs the document as well, brokers can use this information to circumvent and cut others out of a deal. After all, an agreement can be only enforced if one can prove that it has been violated… And some brokers simply ignore the NCNDAs they have signed.
- Proxy buyers and sellers – in many cases the buyer or the seller is not present on the document and they just use a proxy company to gather information. After they receive it, they wait a few weeks and approach the other party directly. This way they are not bound legally, because they have never signed the document… only the proxy did.
- Identity theft – there are some NCNDAs that require a copy of a passport or ID card from the people signing them. This is something one should never ever do, because it is quite easy to make a copy of your personal documents and they can be sold on the black market.
- Malware – if you receive this document in some weird file or extension, and not through Docusign or any e-signature program, be on guard, it can contain malware that gets installed on your computer. Always keep an eye on the format of the file (pdf, doc, docx, pages, rtf etc.), and if it is something you are not familiar with, do not download it. And use an anti-malware program, just in case.
Does one need an NCNDA after all?
There is no direct answer to this question. In some cases it is good to sign one, and it gives brokers a peace of mind. But one must not forget two things: 1) If somebody wants to circumvent, an NCNDA will not stop them. 2) No agreement can replace a good working relationship that is built on mutual trust. With these in mind, it is up to you to decide if you need it. If yes, just be careful what you sign.