Non-Disclosures (NDAs), Minefield or Just a Minor Document? A Field Guide for Angel Investors, Entrepreneurs and Business Advisory 

Over many years of working with, or considering working with, many companies both minor and major, I have encountered a plethora of NDAs landing on my laptop, with the sender’s annotation that please sign this NDA, it’s just a standard form document.  However, I have also discovered that no such standard form document exists.  In fact, I have seen many single sided, and mutual NDAs have potentially critical clauses slipped in that, if agreed to, could haunt you for years, and sometimes impact the ability for you to ply your basic trade talents un-impeded.   Such added clauses are never highlighted, and suddenly you find that the other party can eventually use your disclosed information for their benefit, while you are still restricted from using the information that you garnered from the transaction.  Unfortunately, I have learned to expect the worst, and encounter those clauses often, and not-surprisingly many senders are reluctant to deviate from the format provided.   This reluctance is a good clue to consider working with a different client.  When I work on my Exempt Market Dealer clients, I make my NDAs Mutual as I impart a great deal of learned expertise, advice and proprietary methodology that I consider to be just as valuable as a client’s business details. 

I really suggest that readers of this general information consult legal assistance on this issue, as my summary is not legal advice as I am not a lawyer.  NDAs do get very fact specific.      

Below is a point-form, Canada- and Ontario-focused field guide that you as an Angel Investor, member of the Angel Investors Ontario “AIO” ecosystem, or Entrepreneur can consider during a first-round review of a received NDA. 

1) Where NDAs show up for angels (common scenarios) 

• Investor → Startup (pre-screen / pitch deck stage)
  Often no NDA (many startups won’t ask; many investors won’t sign). 
  If used, it’s usually one-way (investor promises confidentiality) 
• Investor/Angel group → Startup (deep diligence / data room stage) 
  Common: one-way NDA plus clean-team / “need-to-know” sharing rules. 
  Sometimes includes no-contact with employees/customers and non-circumvention. 
• Angel group / led investor → Co-investors, advisers, Small Medium Enterprises “SMEs” (to help diligence an investee) Common: two-step structure 
  NDA between SME/adviser and the angel group, and 
  flow-down obligations to the portfolio company’s confidential info 
• Startup → Employees / contractors / advisers / EIRs / mentors 
  Often: NDA bundled into an employment/contractor/adviser agreement with IP assignment and invention disclosure. 

2) “Types” of NDAs and where each applies (investing + advisor use cases)

One-way (unilateral) NDA
Use when: only one party is disclosing (typical diligence NDA). 
Best for: startups sharing financials, product plans, code/docs, customer data.

Mutual NDA
Use when: both sides will disclose (e.g., joint diligence work, partnership talks, vendor evaluation). 
Watch-out: mutual NDAs can quietly become asymmetric in practice if one side discloses far more.

“Diligence NDA” / Data-room NDA (specialized one-way or mutual)
Use when: disclosure is structured (data room, Q&A log, expert calls).
Typical add-ons: clean team, cybersecurity controls, watermarking, “no download,” audit logs.

Clean-team NDA (or clean-team schedule inside the NDA)
Use when: there’s sensitive competitive info (pricing, roadmaps, customer-level details). 
Mechanic: only approved people (often external counsel/experts) can see certain categories.

Employee NDA (often part of an employment agreement)
Use when: hiring staff who will access confidential information. 
Ontario notes: if it includes post-employment non-compete, Ontario employment law has major constraints (see Section 6).

Contractor / Adviser / SME NDA (often with IP assignment)
Use when: mentors, advisors, SMEs, fractional executives, dev shops, designers, researchers touch product/IP. 
Key issue: who owns improvements and inventions (details below).

Tri-party / “Flow-down” NDA (portfolio company + angel group + SME)
Use when: a third party (SME) needs access to company info through the angel group. 
Benefit: clearer privity and remedies for the company. 

3) Clause-by-clause: what’s inside NDAs, and the “values” each clause can take

(1) Definition of “Confidential Information” 
Common clause values 
Broad catch-all (“all non-public info relating to…”) vs category list (financials, product, customer, code). 
Includes/excludes oral disclosures, visual demos, notes/analyses derived from the info. 
Marking requirement: “marked confidential” vs no marking required (latter is stricter on the recipient). 
Practical investors note overly vague definitions can be harder to enforce; courts focus on whether the information truly had the “quality of confidence” and was shared in confidence.  

2) Purpose limitation (“Use only for…”)
Values
Narrow: “evaluate a potential investment in Company”
Medium: “evaluation + diligence + post-close integration planning”
Broad: “any business purpose” (usually bad for the discloser) 

3) Standard of care (how carefully recipient must protect info)
Values
“Same degree of care as its own confidential info, but not less than reasonable care” (common)
“Best efforts” (higher bar)
Specific security controls (2FA, encryption at rest, no personal email, etc.) 

4) Permitted recipients (“Representatives”)
Values
“Need-to-know employees/officers”
Plus: counsel, accountants, insurers, consultants, IC members
Plus (diligence-heavy): subject matter experts, provided they sign a written NDA at least as strict (flow-down) 

5) Carve-outs (what is NOT confidential)
Almost always includes
Public domain (not via breach)
Already known to recipient (provable)
Independently developed
Rightfully received from a third party
Disclosed under legal compulsion (with notice)
Key “value” choice: who bears proof? Usually, recipient must prove an exception. 

6) Compelled disclosure (subpoena / regulator / court)
Values
Notice to discloser + cooperate to seek protective order
“Minimum necessary disclosure”
Sometimes disallows disclosure to certain parties absent a court order 

7) Term and survival
Values
12–24 months (common for early pitch NDAs)
3–5 years (common for diligence NDAs)
Indefinite for trade secrets (common carve-out: “as long as it remains a trade secret”)
Canadian remedies note courts may tailor remedies to the duration of any unfair “head start,” rather than banning use forever in every case.  

8) Return / destruction of materials
Values
Return vs destroy vs “destroy and certify”
Carve-outs for backup systems and legal retention
Requirement to delete from personal devices/cloud 

9) “No licence / no transfer” of IP
Values
“No licence granted, express or implied”
“All rights reserved”
Why it matters: avoids arguments that disclosure implied permission to use. 

10) Non-solicit / non-circumvention / no-contact (common in investment context)
Values
No poaching employees (6–24 months)
No contacting customers/suppliers learned through diligence
No bypassing the company to do the deal with a counterparty
Ontario caution: if these operate like a restraint of trade, they must be reasonable and clear to be enforceable (see Section 6 on “knocked out” terms).  

11) Remedies (injunction, damages, liquidated damages)
Values
Injunction “acknowledged” (but still discretionary)
Liquidated damages (often contested if punitive)
Fee-shifting (rare in Canada compared to US; Canadian costs rules already exist) 

12) Governing law / forum
Values
Ontario law + Ontario courts (common for Ontario deals)
Arbitration clause (sometimes preferred for confidentiality) 

13) Residuals clause (high stakes)
What it does: lets recipient use “residual knowledge” retained in memory.
Values
None (startup-friendly)
Limited (no use of source code, designs, customer lists)
Broad (investor-friendly, startup-unfriendly) 

14) Privacy / personal information handling (if diligence includes personal data)
Values
“Comply with applicable privacy law”
“No personal data unless necessary; redact; secure; breach notification”
Ontario health data: if the company touches personal health information, Ontario’s PHIPA regime is relevant.  

4) The “IP ownership” layer (especially for advisers, SMEs, contractors) 

This is where NDAs often morph into confidentiality + invention/IP assignment.

Copyright (documents, code, designs, content)
Default rules (high level)

Employees: copyright is often employer-owned when created “in the course of employment” (subject to agreement).  
Contractors/advisers: typically, they own unless there’s a written assignment (and moral rights issues can linger)

Clause values
Assignment of “all right, title, and interest” in deliverables
“Work product” definition (deliverables + drafts + notes)
Moral rights waiver (common for creative works)

Patents / inventions
Default: inventors generally own unless assigned in writing (and employment context can become fact-specific). 
Clause values
“Hereby assign” (present assignment) vs “will assign” (future promise—riskier)
Invention disclosure duty + cooperation on filings
Carve-out for pre-existing inventions (adviser brings their own IP)

Improvements and background IP (the biggest advisor/SME friction point)
Clause values (typical negotiating spectrum)
Company-friendly: company owns all improvements “related to” the business
Middle: company owns improvements created using confidential info or within the scope of engagement
Advisor-friendly: advisor retains improvements to their general know-how, grants company a licence to use
Licence back (when adviser uses their own tools/templates)

Values
Company gets perpetual, royalty-free licence to embedded tools
Field-of-use restrictions (only for company’s internal business)
Right to sublicense (important if the company needs to distribute software) 

5) Quick drafting “fit-for-purpose” patterns (what Angel Investors Ontario “AIO “members actually need) 

For early-stage screening (pitch deck stage) 

• Minimal NDA (or none), I always ask for a deck that they are comfortable to put in the public domain,  but if used: 

• Tight purpose: “evaluate investment” 

• Clear exclusions (public, already known) 

• No IP assignment language (premature here) 

For deep diligence (data room + expert calls) 

• One-way NDA +: 

• permitted recipients includes named SMEs/advisers (flow-down) 

• clean-team schedule for highly sensitive items 

• return/destruction + security controls 

For SMEs / advisers helping an investee 

• Separate adviser agreement (recommended) with: 

• confidentiality + conflict management 

• IP ownership: background IP + work product + improvements 

• publication restriction (no case studies without consent)

   

6) What Canadian / Ontario courts commonly “knock out” (or narrow) in NDA disputes

Ambiguous or overbroad restraints (especially non-competes / restrictive covenants):If a restrictive covenant is unclear or too broad, courts may refuse to enforce it rather than “fix” it. The Supreme Court of Canada treated ambiguity as fatal in a non-compete and refused to rescue it with severance/rectification in that context. 

Ontario employment: non-competes are largely prohibited (post–Oct 25, 2021): Ontario’s ESA generally prohibits non-compete agreements with employees, with key exceptions (e.g., certain executives; sale-of-business scenario). 

Ontario employment contracts: “for-cause termination” language hidden in confidentiality/conflict clauses can void termination protection: Ontario courts have struck down (or treated as illegal) contractual language that says a confidentiality breach automatically means termination “for cause” without aligning with ESA requirements (e.g., wilful misconduct standard). This can cascade and invalidate termination-limiting provisions in the contract. 

Courts won’t protect what isn’t truly confidential (or is effectively public/portable skill): Even with an NDA, Canadian confidentiality law focuses on whether the information had the quality of confidence and was imparted in circumstances creating an obligation; remedies often track real unfair advantage. 

Remedy is not always “forever”: Canadian courts may reject blanket permanent injunctions and instead assess remedies based on the duration of the unfair head start from misuse. 

Client relationships and “information vs relationships”: In disputes involving departing teams, courts distinguish between protectable confidential info and the reality that clients may choose where to go; duties and facts matter a lot.  

7) Bottom-line takeaways for AIO members (practical and investor-relevant) 

• Match the NDA to the stage: pitch ≠ diligence ≠ post-close operations. 

• Define confidential info intelligently: categories + exclusions beat “everything.” 

• For SMEs/advisers, don’t rely on a bare NDA: use a short adviser agreement with IP ownership terms (background IP, work product, improvements, licence-backs). 

• Avoid stealth employment landmines: in Ontario, be very careful with any clause that operates like a non-compete or that triggers “for cause” termination without ESA-safe wording.  

• Expect enforceability to track reasonableness and clarity: Canadian courts generally won’t save sloppy drafting when the effect is to restrain trade or overshoot employment standards.