This clause extends confidentiality obligations to the other party's related companies (subsidiaries, parent companies, sister companies). Without this clause, a company could technically share your secrets with its affiliate and claim the affiliate isn't bound by the agreement. The clause recognizes that modern business structures often involve multiple legal entities under common control. In the US and UK, courts don't automatically assume affiliates are bound by contracts signed by their sister companies. Example: You share trade secrets with Company A, which is owned by Mega Corp—without this clause, Mega Corp's other divisions could use your secrets freely.
Always include affiliate language if you're disclosing information, but make it conditional: affiliates can only access information if they're "directly involved in the project" and sign a confidentiality agreement themselves. If you're receiving information, resist unlimited affiliate access—negotiate that only specific named affiliates can see it, and only those directly performing work. Add a requirement that the disclosing party remains liable for any affiliate breaches, so you have one clear party to sue.
Frequently Asked Questions
What does this clause mean in simple terms?
This clause extends confidentiality obligations to the other party's related companies (subsidiaries, parent companies, sister companies).
Why should I care about this clause?
Without this clause, a company could technically share your secrets with its affiliate and claim the affiliate isn't bound by the agreement.
What are my options?
The clause recognizes that modern business structures often involve multiple legal entities under common control.
How does this affect small businesses?
In the US and UK, courts don't automatically assume affiliates are bound by contracts signed by their sister companies.