Virtual data rooms (VDRs) have in some respects replaced the traditional “brick and mortar” data rooms traditionally used by businesses to share large volumes of confidential information with third parties. While VDRs are most commonly used to allow potential buyers or investors to perform “due diligence” reviews of assets in the context of debt or equity financing, mergers and acquisitions (M&A), or in bankruptcy sales and/or liquidation, VDRs are also increasingly utilized to store and manage discovery materials in document-intensive litigation. There are important issues that the hosting party should consider prior to a VDR going “live,” such as the sensitivity of documents that will be available, whether access to certain information will be limited or restricted based on the stage of the sale or other process necessitating the review, clearly communicating the VDR “rules” to reviewers, and drafting and having executed appropriate confidentiality or disclosure agreements, to name a few.
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