Understanding the New NDA Regulations: What Business Leaders Need to Know About Section 17 of the Victims and Prisoners Act 2024

company - 24 June 2024

Guide for business leaders on the background, implications, and necessary steps to adapt to the Victims and Prisoners Act 2024.

The use of Non-Disclosure Agreements (NDA’s) in business is undergoing significant regulatory changes. Central to this shift is Section 17 of the Victims and Prisoners Act 2024, which will invalidate any NDA clauses that prevent victims from disclosing information about criminal conduct. This article will guide business leaders through the background, implications, and necessary steps to adapt to this new legislation.

Rapid Legislative Changes

In response to growing concerns about the misuse of NDA’s, particularly to silence victims of criminal conduct, the Ministry of Justice announced reforms on 28 March 2024. This led to the fast-tracking of the Victims and Prisoners Act 2024, which passed just before Parliament dissolved on 30 May 2024. This urgency highlights the critical need for businesses to understand and comply with these changes.

Increased Regulatory Scrutiny

While NDA’s play a legitimate role in protecting sensitive information and resolving employment disputes, their misuse in cases of sexual misconduct, harassment, and discrimination has led to increased scrutiny. Business leaders must now consider the broader implications of NDA’s beyond their immediate business interests.

Misconceptions and Regulatory Guidance

A common misconception is that business-to-business NDA’s, used typically in M&A transactions, and joint ventures, are not affected by these changes. However, the Solicitors Regulation Authority (SRA) has clarified that all NDA’s, regardless of context, should not impede disclosures to regulators or law enforcement.

What Section 17 Entails

The Victims and Prisoners Act 2024 specifically targets NDA provisions that prevent victims of crime from disclosing information to:

  • Law enforcement agencies
  • Qualified lawyers for legal advice
  • Regulated professionals for support
  • Support service providers for victims
  • Regulators for compliance purposes
  • Authorised recipients on behalf of the above
  • Close family members for support

The law's scope is precise, allowing disclosures related to criminal conduct and only to specified recipients. It does not permit disclosures of non-criminal conduct or confidential business information unrelated to criminal activities.

Impact on NDA Enforcement

While the enforcement of NDA’s in court may not see dramatic changes, the new law is designed to encourage victims to come forward without fear of legal repercussions. This shift reinforces that NDA’s cannot be used to silence reports of criminal conduct.

Regulatory Actions

The SRA has been proactive, issuing guidance and warnings on NDA’s. Their position is clear: NDA’s should not obstruct criminal investigations, reporting of offenses, or legally required disclosures. Additionally, NDA’s should not influence the content of these reports or include unenforceable clauses.

The Financial Conduct Authority (FCA) is also focusing on NDA’s in financial services, ensuring they do not deter whistleblowers or prevent internal disciplinary actions from being reported.

Practical Takeaways for Business Leaders

Business leaders must take several steps to ensure their use of NDA’s aligns with the new regulatory landscape:

1. Evaluate on a Case-by-Case Basis: Assess each NDA for necessity and appropriate scope.

2. Justify NDA’s: Be prepared to justify the use of NDA’s to regulators if challenged.

3. Fair Negotiation Practices: Avoid exploiting power imbalances in negotiations. Ensure parties have time and access to independent legal advice.

4. Monitor Compliance: Regularly review NDA’s to identify and address potential systemic issues within your organisation.

5. Stay Informed: Keep up with legislative changes, SRA guidance, and industry standards to ensure compliance.

As the regulatory environment continues to evolve, it is crucial for business owners and executives to stay informed and adapt their practices accordingly. By doing so, you can ensure that your use of NDA’s is ethical, lawful, and aligned with the latest regulations.

If you have any queries about NDA’s or if it’s time to update your NDA template, please do not hesitate to get in touch with our Commercial Team by telephone on 0207 052 3545 or by email info@kaurmaxwell.com.

By: Hiten Patel