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NDA (Confidentiality Agreement)

21.10.2024

An NDA (Non-Disclosure Agreement) is a confidentiality agreement: one party shares information with the other, and the other undertakes not to disclose it to third parties and to use it only as agreed. In Kazakhstan an NDA is concluded as a contract not provided for by legislation: the parties may conclude such a contract (Article 380(2) of the Civil Code), and its terms are determined at their discretion, except where the content of a term is prescribed by legislation (Article 382(1)). Below: what information the law protects, what to include in an NDA, how to execute it, what liability follows a breach, and how an NDA with an employee differs from an NDA with a business partner.

When you need an NDA

An NDA is signed before the information is shared: before negotiating a deal, before a buyer or investor reviews the company, before a contractor gets access to the customer base, source code or technology. An NDA can be one-way, when only one party discloses information, or mutual, when both do. A confidentiality clause can also be included in the main contract; a separate NDA is convenient when there is no main contract yet.

Example. A startup owner is looking for an investor and wants to show the product and the business model. If an NDA is signed first, the investor is obliged not to disclose this information and not to use it for anything other than the investment decision, and is liable under the contract for a breach.

What information the law protects

Civil legislation protects service or commercial secrets if all of the following apply (Article 126(1) of the Civil Code):

  • the information has actual or potential commercial value because it is unknown to third parties;
  • there is no free access to it on a legal basis;
  • the holder of the information takes measures to protect its confidentiality.

The right to protect such information, including know-how, arises without registration or certificates and lasts as long as these conditions are met (Article 1017(2) and (4) of the Civil Code, Special Part).

The business determines the protection measures itself (Article 28(2) and (3) of the Entrepreneurial Code). They may include a list of information constituting a trade secret, restricting access to it by establishing a procedure for handling this information and monitoring compliance with it, and keeping a record of persons who have obtained access to the trade secret or to whom it has been provided (Article 28(4)). An NDA shows to whom, when and on what terms the information was shared.

Not everything can be made a secret. The rules on undisclosed information do not apply to information that, under legislative acts, cannot constitute a service or commercial secret, for example information on legal entities, on rights to property and transactions with it, and information submitted in statistical form (Article 1017(3) of the Civil Code, Special Part). Publicly available information includes, among other things, the name and date of registration of a legal entity, its identification number, legal address, type of activity and the full name of its head (Article 28(13) of the Entrepreneurial Code).

What to include in an NDA

A contract is deemed concluded when the parties have reached agreement on all its essential terms: the subject matter, the terms recognised as essential by legislation or necessary for contracts of this type, and all terms on which, at the request of one of the parties, agreement must be reached (Article 393(1) of the Civil Code). For an NDA, the subject matter is which information is confidential and what may be done with it. An NDA should set out:

  • the information — a list or criteria: documents marked “Confidential”, information on customers, prices, technology, deal terms;
  • the purpose — what the receiving party may use the information for, for example only to evaluate the deal;
  • who may have access — which employees, consultants or auditors of the receiving party may receive the information, and who is responsible for their keeping it confidential;
  • exceptions — information that is already public or was obtained by the party independently and lawfully, and disclosure required by law. A person who has independently and lawfully obtained such information may use it and is not liable to the holder (Article 1018(4) of the Civil Code, Special Part);
  • the term — how long the confidentiality obligation lasts, including after negotiations or cooperation end;
  • media — returning or destroying documents and copies on request or when the term expires;
  • liability — a penalty and compensation for losses (see below);
  • disputes — court or arbitration, and the governing law if a party is foreign.

How to execute an NDA

Transactions in the course of business activity are made in writing, except those performed at the moment they are made, unless otherwise specifically provided by legislation for certain types of transactions or follows from business customs (Article 152(1)(1) of the Civil Code). The written form may be on paper or electronic (Article 152(1-1)). A transaction is signed by the parties or their representatives, unless otherwise follows from business customs; facsimile reproduction of a signature and an electronic digital signature may be used unless this contradicts legislation or the demand of one of the participants (Article 152(2)). A bilateral contract may also be concluded by exchanging documents, each signed by the party from which it comes (Article 152(3)).

Liability for breaching an NDA

Counterparties that have disclosed a service or commercial secret contrary to a civil law contract must compensate the damage caused (Article 126(2) of the Civil Code). An NDA is exactly such a contract: disclosure becomes a breach of an obligation.

  • Losses. A debtor who has breached an obligation must compensate the creditor for the losses caused by the breach (Article 350(1) of the Civil Code). An agreement made before the breach releasing the debtor from compensating losses is void, but the parties may agree that only actual damage to property is recovered (Article 350(2)).
  • Penalty. When claiming a penalty, the creditor does not have to prove that it suffered losses (Article 293). This matters for an NDA: after a leak, the amount of losses can be hard to prove. If a penalty is set, losses are compensated to the extent not covered by the penalty; laws or the contract may provide for cases where losses are recovered in full on top of the penalty, or where the creditor may choose to recover either the penalty or the losses (Article 351(1)). If the penalty is excessively large compared with the creditor’s losses, the court may reduce it at the debtor’s request, taking into account the extent to which the debtor has performed the obligation and the interests of the debtor and the creditor that deserve attention (Article 297).
  • Stopping the use. A person lawfully holding undisclosed information may demand that whoever uses it unlawfully stop using it immediately; taking into account the funds a good-faith acquirer has spent on using it, the court may allow its further use under a paid exclusive licence. A person who has obtained, distributed or used such information without legal grounds must compensate the losses (Article 1018(1) and (3) of the Civil Code, Special Part).
  • Criminal liability. Article 223 of the Criminal Code punishes, among other things, unlawful disclosure or use of information constituting a trade secret without its owner’s consent by a person to whom it was entrusted through service or work, committed out of mercenary or other personal interest and causing major damage (part 2): a fine of up to 3,000 MCI, correctional work, community service of up to 800 hours, or restriction or deprivation of liberty for up to three years. Part 1 of the same article punishes collecting such information for disclosure or unlawful use by stealing documents, bribing or threatening persons holding the trade secret or their relatives, intercepting communications, unlawfully accessing a computer system or network, using special technical means, or by any other unlawful method.

An NDA with an employee

With an employee, an NDA does not replace labour legislation but supplements it:

  • an employee must not disclose information constituting state secrets, official, commercial or other secrets protected by law that became known to them in connection with their work duties (Article 22(2)(6) of the Labour Code);
  • the employer may require employees to sign a non-disclosure undertaking for information constituting a trade secret (Article 28(6) of the Entrepreneurial Code);
  • for remote work, a term on keeping and not disclosing such information is provided in the employment contract, an act of the employer or an act of the host party (Article 138(8) of the Labour Code);
  • disclosure by an employee of information constituting state secrets and other secrets protected by law that became known to them in connection with their work duties is a ground for the employer to terminate the employment contract (Article 52(1)(15) of the Labour Code);
  • an employee compensates damage to the employer within the limits established by the Labour Code and other laws (Article 22(2)(7) of the Labour Code).

It is advisable to set out the list of information the company treats as a trade secret in an act of the employer and have employees sign that they have read it: then it is clear what exactly they must not disclose.

How we can help

We draft one-way or mutual NDAs for your deal, review NDAs sent by a counterparty or a foreign partner, and prepare trade secret regulations and non-disclosure undertakings for employees. We draft NDAs and other contracts under the service “Contract work: drafting and review of contracts“.

The first consultation is free. Call us: +7 700 500 05 53 or write on WhatsApp.


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