Does your company need a non-disclosure agreement (NDA)?

Businesses will often share confidential information with investors, employees, contractors, suppliers, and commercial partners. An NDA can help to protect that information, but should be tailored appropriately and supported by practical confidentiality measures. This guide explains how NDAs work and how they can help safeguard your information.

• A guide to master service agreements
• What is passing off?
• Shareholder disputes – how to deal with them

What is a non-disclosure agreement?

An NDA, also commonly called a confidentiality agreement, is a legal contract that helps protect confidential information. Find out when your company needs a non-disclosure agreement, what to include, and how the Employment Rights Act affects NDAs.

It typically sets out:

• what information is confidential
• who may access it
• how the party you share information with (the recipient) may use it

A written NDA is usually the clearest way to record confidentiality obligations. Duties of confidence can arise under law without a written agreement. But an NDA lets parties clearly define the protected information, the permitted purpose, and the recipient’s obligations. It can also help avoid disputes and make enforcement easier if the recipient misuses the information.

Businesses commonly use NDAs to protect:

• confidential information relating to intellectual property and trade secrets
• technical know-how, data, and designs
• research projects
• business plans and commercial strategies
• financial information
• customer and supplier information
• confidential negotiations

When you disclose information under an NDA, the recipient agrees to keep it confidential and use it only for the agreed purpose. However, NDAs don’t usually protect information that is already public or already known to the recipient.

To enforce an NDA, you usually need to show:

• what information was confidential
• what the NDA required
• how the other party breached it

If a party breaches an NDA, you might be able to make a legal claim for damages or seek an injunction to stop further use or disclosure of your information. However, these cases are complex. Vague or unclear NDAs can be even harder to enforce.

Once confidential information is made public, no legal remedy can make it confidential again, and the damage is done. NDAs should be supported by practical safeguards like limiting access to confidential information, sharing only what’s necessary, and controlling who receives it.

One-way vs mutual NDAs: what’s the difference?

NDAs can be one-way or mutual, and they can be between two parties or multiple parties:

• One-way NDA. Use this when only one party will disclose confidential information. For example, this might be where you’re negotiating with a supplier or giving a contractor access to sensitive business information.
• Mutual NDA. Use this when both parties will disclose confidential information. Mutual NDAs can be common in joint ventures and strategic partnerships where each party shares confidential information and mutual protection is needed.

You’ll need to choose the right type of NDA that matches how confidential information will flow between the parties. Review any NDA before using it. A generic template won’t necessarily cover your situation. For example, if you’re sharing personal data, you might need additional data protection clauses which are tailored appropriately.

When does your company need an NDA?

You may need an NDA before you share confidential business information that could harm your business if it’s misused or leaked.

In this case, ask the other party to sign an NDA before you share any sensitive information with them. If you’ve already shared information with them, ensure that your NDA clearly covers those earlier disclosures.

NDAs are also common in commercial partnerships. For example, another business might ask you to sign one before sharing confidential information with you.

You may not need an NDA if the information is public or:

• Suitable confidentiality obligations already exist, such as where there’s an appropriate confidentiality clause in the relevant contract.
• You’re sharing information with regulated professionals who have confidentiality duties, e.g., solicitors.

Common scenarios where you may need an NDA

1. Partnering with another company

If you’re looking to enter into a business relationship with another company, whether as a customer, supplier, or partner, sensitive information about your company and theirs is likely to be discussed.

For example: you’re developing a new service as part of your existing offering. Before you launch, you need to notify an existing partner about the service so they can prepare their marketing activity. You don’t want your competition to find out about this, so it’s reasonable to have your partner sign an NDA.

2. Seeking investment or business advice

If you’re looking for investment or advice from a bank, accountant, or financial adviser, you may need to discuss your business’s activities in detail. Before sharing confidential information, you should consider whether an NDA is needed.

For example: your startup requires funding, and you have several meetings with potential investors lined up. To secure the investment, you may need to share sensitive information about your company, such as your business plan, financial details, and information about your staff. To help protect your information before you share it, you ask the investors to sign an NDA.

3. Using a third-party service provider

As your business grows, you may need to pay other businesses to provide you with a service. However, to provide that service effectively, they may need access to information you don’t want used or disclosed without permission.

For example: your business has hired a digital marketing consultant to handle an ongoing email campaign. To do this, you must share information relating to your clients. Before doing so, you should have the consultant sign an NDA to limit how they may use or disclose the information.

If the consultant processes personal data on your behalf, you’ll also need written data processing terms required by UK data protection law. An NDA, or another written contract, can cover these clauses.

4. Protecting information from employees

NDAs aren’t just for dealing with other companies. They may be appropriate for employees, too, where needed, or candidates if you plan to share confidential information in an interview.

For example: you’ve created an innovative new product that is causing a stir in the industry. As your business grows, you need to take on employees to help you. To do their jobs correctly, they need to access confidential information relating to your intellectual property. An NDA or confidentiality clause within their contract can require them to protect that information.

What should a non-disclosure agreement include?

A well-drafted NDA will usually cover key clauses, including:

• The type of information sharing. This explains whether one or both parties will share confidential information and identifies the project, discussion, or transaction covered.
• The parties. The NDA should identify who is sharing the information, who is receiving it, and any related businesses that the NDA covers.
• The confidential information and the reason for disclosure. The NDA should clearly describe the information it protects and the purpose for sharing it, so the parties understand what is covered and how the information can be used.
• Who can access the information. The NDA should identify any employees, advisers, contractors, subcontractors, or other authorised persons who may receive the information, and which restrictions apply to them.
• Confidentiality obligations. These are the key rules and steps the recipient must take to keep the information secure and confidential.
• Information excluded from the NDA. This identifies information that is not protected, e.g. information already in the public domain.
• Required disclosures. This explains when the recipient may disclose the information, e.g. because of a legal requirement.
• Return or deletion of information. This explains what the recipient must do with the information when the arrangement ends.
• Reporting breaches and remedies. This covers when the recipient must report an actual or suspected breach and the remedies available if a breach occurs.
• Duration. Your NDA should state how long the confidentiality obligations will last.

Using a simple, short NDA template may be suitable for a low-risk project. But if the information is particularly valuable or sensitive, it’s worth getting professional advice rather than handling it yourself.

How much does an NDA cost?

There’s no standard price for an NDA. The cost of legal advice varies depending on the law firm and the complexity of the NDA. Fees may range from a few hundred pounds for a straightforward NDA to several thousand pounds for a complex one. Costs tend to rise with negotiation, highly sensitive information, overseas parties, or extra legal or data protection requirements.

An NDA template for UK businesses can be a quick and cost-effective option, provided it’s properly drafted and adapted to your circumstances. 1st Formations’ Business Document Template Library costs £99.99 per year. It provides access to more than 400 customisable templates, which are professionally reviewed by our in-house experts, including NDA and other valuable key business documents.

NDA vs confidentiality clause: which do you need?

Both a standalone NDA and a confidentiality clause can help you protect confidential information. The key difference is that an NDA is a standalone agreement, whereas a confidentiality clause forms part of a wider contract.

A standalone NDA	A confidentiality clause
Creates a separate agreement that focuses on protecting confidential information. May be suitable where sharing confidential information is the main purpose of the arrangement.	Forms part of another agreement, e.g. an employment contract, consultancy agreement, or supplier contract. May be suitable where confidentiality is only one aspect of an ongoing relationship.

You could choose a standalone NDA if confidentiality is the main purpose of the arrangement. Or you could include a confidentiality clause in a wider contract if it’s just one part of a broader relationship.

When your company should not use an NDA

There are some situations where you shouldn’t use an NDA – especially if the terms would not be legally enforceable. If an NDA is not enforceable, you won’t be able to take legal action against someone for breaking it. You shouldn’t use an NDA improperly or suggest that legally protected disclosures must be kept secret.

According to Acas guidance, an NDA can’t prevent someone from:

• reporting wrongdoing through whistleblowing
• discussing their pay at work in relation to equal pay issues
• reporting a crime to the police
• sharing information about a crime to get advice or support as a victim of a crime in England or Wales

NDAs and the Employment Rights Act 2025: what’s changing?

The law affecting workplace NDAs is changing.

Under the Employment Rights Act 2025, a provision in an NDA between an employer and a worker will be void to the extent that it stops a worker from speaking about relevant workplace harassment or discrimination, or the employer’s response to it. The new rules will only affect workplace NDAs, not commercial NDAs between businesses.

This ban is broad and will contain detailed rules, although limited exceptions will apply. The ban will be explained in future regulations, so employers need to watch this space. The government’s consultation on the new rules closed on 8 July 2026. The changes are expected to come into force in 2027 but have not yet been confirmed.

A key takeaway is that employers should review confidentiality clauses in employment contracts and settlement agreements before the new rules take effect.

Whether you’re briefing an investor or a new supplier, having the right NDA in place could help protect your confidential information.

1st Formations can help you form a company and use legally sound documents to help your business develop strong legal foundations from the outset.

Disclaimer

This article provides general and high-level information about non-disclosure agreements and should not be relied upon as legal advice. The terms that are appropriate for an NDA can depend on the nature of the confidential information, the relationship between the parties, and the purpose of disclosure. You should seek advice from a qualified legal specialist for specific guidance on the confidentiality provisions that apply to your situation and what your agreement should cover.