Also known as a non-disclosure agreement, a confidentiality agreement is used to protect sensitive information from disclosure by others. Here’s what should go in one so you can draft a confidentiality agreement that works for your small business.
Before we explain more about confidentiality agreements, there are some legal changes you need to know about for 2025.
New NDA laws – what you need to know
New NDA laws came in on 1 October to make it clear that non-disclosure agreements can’t be enforced in a way that prevents victims from reporting crimes to the police.
Section 17 of the Victims and Prisoners Act applies to England and Wales and means that victims can share information with certain organisations without being in breach of their NDA.
It’s important to note that this applies to individuals who “reasonably believe they are a victim of a crime”. The legislation highlights that “there does not have to be a formal investigation or conviction for someone to be a victim of crime.”
Make sure you’re clear on the new legislation if you use NDAs to protect your intellectual property (IP).
What does this mean in practice?
There’s a list of government bodies and other groups that victims can speak to about a crime, and an NDA can’t stop this from happening.
This includes the:
- Health and Safety Executive
- Competition and Markets Authority
- Environment Agency
- Gambling Commission
- Financial Conduct Authority
- Information Commissioner’s Office
- Serious Fraud Office
It also lists police, qualified lawyers, regulated professionals, victim support services, regulators, and a victim’s close family for support.
Read the full guidance on the changes to the Victims and Prisoners Act legislation on the UK government website.
What do small businesses need to do?
It’s important to review any existing non-disclosure agreements to check they’re in line with the law.
Make sure any templates that you use within your business reflect these changes and that your internal policies are up to date.
You can also check government resources on your Companies House account as well.
What is a confidentiality agreement?
A confidentiality agreement is a legal document that sets out how information can be shared in confidence. This could be between potential partners and investors, advisors, contractors you work with, or people you employ in your business.
Let’s say you’re working on a new business idea and are speaking with a financial advisor, a confidentiality agreement can be put in place to protect your plans and keep your invention or design secret.
What does confidential information cover?
‘Confidential’ means unpublished, not externally communicated outside the business, or otherwise not publicly or generally accessible information and materials.
This could include confidential proprietary information relating to your business, for example:
- business activities
- customers
- clients
- suppliers
- plans and intentions
- market opportunities
It may also include confidential operations, processes, product information, knowledge, technical information, designs, trade secrets, and software. Beyond that, it could cover information, findings, data, or analysis that’s come out of the confidential information.
How does it work?
The confidentiality agreement takes effect from the moment it’s signed by all parties. If one of the parties breaks the agreement, they could face legal action or fines.
Sometimes it might not be clear if something disclosed by the other party should be kept confidential. If that’s the case, it’s always a good idea to treat it as confidential unless it’s confirmed in writing by the owner of the information or materials.
What is an NDA?
An NDA, or non-disclosure agreement, is a type of confidentiality agreement.
There are two types of NDA: one-way and mutual. A one-way NDA is for when you’re the only one disclosing confidential information, while a mutual NDA is needed when both parties are sharing information.
Here’s just a few examples of when you might use an NDA:
- speaking to investors – for example angel investors
- negotiating with manufacturers while developing a new product
- entering into a partnership or merging with another business – you might use an NDA to keep this confidential from employees and the general public until a deal has been made
- speaking to suppliers when considering outsourcing options for a new product
- for staff members – an employee confidentiality agreement may be used to prevent an employee sharing information about your business
What to include in your confidentiality agreement
When you create your own confidentiality agreement, you’ll need to add in specific details:
- recipient company name and address
- date
- your company name
- your company address
- your registered company number
Both you and the other parties will need to sign this document to agree to its terms. The signed agreement should then be returned to you.
A typical confidentiality agreement template outlines the purpose behind the agreement, along with the limitations on obligations. There are also sections on how you return the confidential information, as well as how to terminate the agreement if you or another party needs to.
You may also want to get legal advice on drawing up an NDA template appropriate for your business. As business law is a complex and important topic to get right, be sure to take legal advice if you’re not sure of anything.
More small business guides
- A guide to the Data Protection Act and GDPR for small businesses
- How to write a staff handbook
- What is the national minimum wage?
- How much business insurance do I need?
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