Confidentiality Agreements and Non-Disclosure Agreements

When Do You Need a Confidentiality Agreement?

NDAs are used in a wide range of business situations, including:

• Pre-contract discussions — When exploring a potential business relationship and sharing commercially sensitive information
• Business sales and acquisitions — Before disclosing financial, operational or strategic information to a prospective buyer
• Investment discussions — When sharing business plans, projections and IP with potential investors
• Joint ventures and partnerships — Before parties share their respective know-how and business information
• Engaging consultants or contractors — When third parties will have access to your systems, data or proprietary information
• Employment — To protect trade secrets, customer lists and business strategies (often included in employment contracts but sometimes as a standalone document)
• Product development — When working with designers, manufacturers or developers who will see your ideas, prototypes or specifications

One-Way or Mutual?

One-way (unilateral) NDAs are used when only one party is disclosing confidential information. For example, when you’re sharing your business plan with a potential investor.

Mutual (bilateral) NDAs are used when both parties will be sharing confidential information with each other. For example, when two businesses are exploring a potential collaboration and both need to disclose sensitive information.

Our team will advise you on which type is appropriate for your situation.

What Should a Confidentiality Agreement Cover?

A well-drafted NDA should clearly address:

• Definition of confidential information — What’s covered? This should be broad enough to protect you but specific enough to be enforceable. It typically includes business plans, financial information, customer data, pricing, technical know-how, trade secrets, and any other information that isn’t publicly available.
• Permitted use — The receiving party should only be allowed to use the information for a specified purpose (e.g. evaluating a potential transaction)
• Permitted disclosure — Who can the receiving party share the information with? Usually limited to their employees, officers, advisers and agents who need to know — and who are themselves bound by confidentiality

• Duration — How long the confidentiality obligations last. This might be for the duration of the relationship plus a fixed period afterwards, or indefinitely for certain types of information (such as trade secrets)
• Exclusions — Standard carve-outs for information that is already public, was already known to the recipient, was independently developed, or must be disclosed by law
• Return or destruction — What happens to the confidential information when the relationship or discussions end
• Remedies — Confirmation that the disclosing party may seek injunctive relief (a court order to stop disclosure) in addition to damages, given that a breach could cause irreparable harm
• No licence or obligation — Clarifying that sharing the information doesn’t grant any IP rights or commit either party to entering into a further agreement
• Governing law and jurisdiction

Common Mistakes

• Using a generic template that doesn’t cover the right information
• Defining “confidential information” too narrowly, leaving sensitive information unprotected
• Not specifying the permitted purpose, allowing the recipient to use the information for anything
• Setting a duration that’s too short for the type of information being shared
• Relying on a verbal promise of confidentiality instead of a written agreement
• Not obtaining an NDA before sharing sensitive information (once it’s out, it’s out)
• Failing to include provisions for return or destruction of materials

Enforceability

For a confidentiality agreement to be enforceable, it must be reasonable in scope and duration. Overly broad or oppressive restrictions may not be upheld by a court. Our team ensures your NDA strikes the right balance — comprehensive enough to protect you, but reasonable enough to be enforceable.

How We Can Help

At Nelsons, our Commercial Team drafts and advises on confidentiality agreements for businesses in every sector. Whether you need a simple one-page NDA for an initial business discussion or a comprehensive confidentiality framework for a complex transaction, we provide practical, commercially sound advice that keeps your most valuable information safe.

We’re based in Derby, Leicester and Nottingham, but we advise businesses throughout the UK and beyond.

Call us: 0800 024 1976  Submit an enquiry: Complete our online enquiry form