Investigating the Two-year Morass: An Examination of the Legal Implications and Boundaries of Non-Solicitation Clauses in Confidential and Non-Disclosure Agreements for M&A Transactions in Nigeria

Abstract

Generally, due to the necessity of information exchange in typical mergers and acquisitions (M&A) transactions, parties start out by entering into confidentiality or non-disclosure agreements for many reasons, but majorly to safeguard the exchange of sensitive information in furtherance of the proposed transaction and to prevent adverse or unintended use of such information whether the transaction progresses or not. In drafting and negotiating these confidentiality and non-disclosure agreements, it is important for solicitors to pay particular attention to some key clauses and the extent of liability each party has under such clauses. The focus of solicitors and their negotiation stance are determined by the parties which they represent. While it is possible that both the prospective buyer and the prospective seller may envisage disclosing confidential information, it is more commonplace for the prospective seller to be caught in the definition of “Disclosing Party” as opposed to “Receiving Party” or “Recipient” of confidential information. This is because the transaction is founded on the disclosure of the information of the target entity by the seller and the appeal of the information to the buyer who either chooses to progress with the transaction or not, on the basis of information disclosed. Examples of key negotiated clauses in a non-disclosure or confidentiality agreement are the definition of confidential information clause, any exclusivity clauses (usually of particular concern to the seller), the extent of permitted disclosures or any employee non-solicitation clauses whether the parties to the agreement are competitors in the same market or not. This paper interrogates the usefulness of the non-solicitation clause in a non-disclosure agreement, analyses the extent of its enforceability in Nigerian jurisprudence and examines its restrictions which are often shrouded in uncertainty. 

Keywords: NDA, M&A, Mergers, Acquisitions, Corporate, Law, Commercial, Competition, Restraint of Trade, Nigeria