Confidentiality Agreements As A Compliance Tool: NDAs, UPSI Disclosure, And Due Diligence In Indian M&A

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Arushi Mishra, BA LL.B., School of Law, Kalinga University, Chhattisgarh

ABSTRACT

Mergers and acquisitions involving publicly listed entities in India require dealmakers to carefully balance the business need for due diligence with strict securities regulations. To accurately price a target company, potential buyers need access to highly sensitive, non-public data, much of which qualifies as Unpublished Price-Sensitive Information (UPSI) under the SEBI (Prohibition of Insider Trading) Regulations, 2015. While Regulation 3 offers a conditional safe harbor to share this data for legitimate corporate deals, it demands strict governance safeguards. This legal requirement transforms the Non-Disclosure Agreement (NDA) from a basic business contract used to protect trade secrets into a mandatory tool for regulatory compliance. Using a doctrinal research methodology, this paper examines the laws governing UPSI disclosure, including the critical 2019 amendments that require listed companies to set "legitimate purpose" policies and keep a time-stamped Structured Digital Database (SDD). The research points out a major legal gap: the law requires a target company's board to form an "informed opinion" that sharing the data is in the company's best interests, but it offers no clear criteria for this standard, leaving dealmakers vulnerable to regulatory audits if a deal falls apart. Additionally, the paper explores the practical friction between the strict secrecy of M&A NDAs and the continuous reporting rules under the SEBI LODR Regulations, especially when companies are forced to publicly confirm or deny market rumors. To navigate this regulatory minefield, the paper proposes a custom, compliance- linked NDA framework designed specifically for public M&A in India. By building absolute trading bans, strict SDD logging rules, and rapid leak- reporting deadlines directly into the contract, this framework helps dealmakers seamlessly combine private contractual obligations with public securities law to protect market integrity.

Keywords: Mergers and Acquisitions, Unpublished Price-Sensitive Information (UPSI), SEBI (PIT) Regulations, Due Diligence, Non- Disclosure Agreement, Structured Digital Database.

158. CONFIDENTIALITY AGREEMENTS AS A COMPLIANCE TOOL- NDAS, UPSI DISCLOSURE, AND DUE DILIG

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