Confidentiality Agreements and the Disclosure of Sensitive Business Records in a Divorce
While divorce can be a difficult and stressful process under normal circumstances, it can be especially stressful and complicated for business owners, or for anyone who holds an ownership interest in a business. Many business owners (or business interest owners) want, or are otherwise required by company policy, to keep certain records and information regarding their business confidential. However, in Connecticut, a business interest constitutes an asset that is subject to equitable distribution between divorcing parties and, as result, where a business interest is at stake in a divorce, a professional appraisal of that interest by a business valuation expert is often necessary. What happens when your spouse asks you to produce confidential or sensitive business records?
Are Confidential or Sensitive Business Records Discoverable in a Divorce?
Generally speaking, yes. In a divorce, each party has the right to seek full and complete disclosure of any and all pertinent financial records from his or her spouse. Accordingly, if you own a business or own an interest in a business, your spouse will be entitled to seek information relating to your business interest (even sensitive or otherwise confidential information ) which is relevant to any financial issues in your divorce including, for example, the value of your business interest or the amount of income that you derive from a business. While you will always maintain a right to object to any specific requests for information (on any number of available bases), at the end of the day you may be required by a judge to produce sensitive information that you or your business would otherwise wish to keep confidential.
How Can I Limit Exposure of Confidential Business Information?
A common way to limit the exposure of any sensitive and/or confidential business information that you are required to disclose to your spouse in a divorce is to execute a Confidentiality Agreement, also referred to as a Non-Disclosure Agreement.
What is a Confidentiality Agreement?
A Confidentiality Agreement is a legal contract between parties establishing a confidential relationship between a person or company who is required to disclose sensitive information, and the person(s) to whom such information will be disclosed. In the context of a divorce, a Confidentiality Agreement typically precludes the non-disclosing spouse (i.e., the spouse who has requested and is receiving the confidential information) from disseminating the confidential information he or she receives pursuant to the Agreement to any third parties, typically with the exception of his or her attorney or any relevant experts that he or she has retained. Depending on the nature of the business and/or the information at issue, the disclosing party may also ask a court to seal the court record to prevent any information offered into evidence at a judicial proceeding from becoming public.
What Should be Included in a Confidentiality Agreement?
While Confidentiality Agreements should not be approached with a “one size fits all,” mentality, any such Agreement should, at a minimum: (1) define with specificity the type of information that will be protected by the Agreement; (2) delineate clearly the person(s) or institution(s) to whom any confidential information disclosed pursuant to the Agreement may be disseminated; (3) set forth with specificity the purposes for which confidential information may be utilized; (4) set forth with specificity what measures any parties to whom confidential information is disseminated must take to ensure that confidentiality is maintained (including rules about how confidential materials must be stored and/or maintained and how and when they must be destroyed); and (5) setting forth remedies that the disclosing party may seek against the non-disclosing party if the Confidentiality Agreement is breached.
At Broder & Orland LLC, we are extremely experienced and adept at drafting and negotiating Confidentiality Agreements in order to help our clients protect against the dissemination of confidential or otherwise sensitive business information.