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When your business is growing, confidential information becomes an asset in its own right, whether it is customer data, supplier terms, systems and processes, all of these and more can be commercially sensitive.
If that information is misused or shared improperly, the fallout can be immediate, leading to lost revenue, weakened negotiating position or a deal that collapses because trust has been eroded.
A non-disclosure agreement, often referred to as an NDA, is one of the simplest legal tools available to protect that information.
Done properly, it sets clear boundaries on how information can be used and shared and gives you legal options if things go wrong.
Step one: Understand what an NDA does
An NDA is a legally binding agreement between two or more parties. Its purpose is to control what happens to confidential information that is being shared.
Some NDAs are one-way, where only one party discloses information. Others are mutual, where both parties exchange confidential information.
Mutual NDAs are common in early-stage commercial discussions where both sides need to share enough detail to explore whether a relationship is viable.
You will often see NDAs used when:
- Pitching a new product or service to investors or commercial partners
- Carrying out due diligence for a merger, acquisition, investment or sale
- Negotiating with suppliers, distributors or key contractors
- Sharing pricing structures, client information or commercial strategy
- Giving employees or consultants access to sensitive data
If disclosure would weaken your position, damage your business or give someone else an advantage, you should treat an NDA as a baseline rather than an optional extra.
Step two: Define what you are protecting
NDAs are most effective when they are clear and targeted. In commercial settings, the information covered often includes:
- Trade secrets, including technical processes, methods, software and proprietary data
- Commercial information, such as pricing, margins, business plans, supplier arrangements,and pipeline details
- Customer and employee information, where confidentiality overlaps with data protection obligations
A well drafted NDA should also set out what happens if the terms are breached, including the ability to seek damages and, where appropriate, an injunction to prevent further disclosure or misuse.
Step three: Use NDAs sparingly and ethically
NDAs can attract scrutiny, particularly in an employment context where they may be perceived as restricting individuals from speaking up about wrongdoing.
For businesses, the key is to ensure any NDA is used for its proper purpose: protecting legitimate confidential information.
The obligations should be proportionate, lawful and appropriate to the relationship. Where confidentiality clauses sit alongside restrictions such as non-compete or non-solicitation terms, extra care is needed to ensure the overall approach is fair, enforceable and defensible.
Step four: Make sure the NDA is enforceable
An NDA is only effective if it can be enforced in practice. That starts with clearly identifying who the agreement applies to and who is actually allowed to access the confidential information.
It should then define what information is protected, but without casting the net so widely that the obligations become unreasonable or unclear.
The agreement should also explain why the information is being shared and strictly limit how it can be used beyond that purpose.
Confidentiality should not be open-ended by default, so the NDA needs to set out how long those obligations will last, as well as what should happen to the information once the relationship ends, including how it is stored, returned or securely destroyed.
Finally, the NDA should deal with what happens if things go wrong, setting out practical remedies such as the right to seek damages or an injunction to prevent further misuse.
Where these elements are missing, disproportionate or poorly drafted, a court may be reluctant to enforce the agreement at all, which is why relying on generic templates can leave businesses exposed rather than protected.
Step five: Avoid common drafting pitfalls
Disputes often arise not because an NDA was missing, but because the NDA was unclear. Common issues include:
- Definitions that are so broad they become difficult to enforce
- Vague wording that creates disagreement about what was protected
- No clear purpose limitation, weakening your position if a dispute arises
- Terms that do not match the reality of the transaction or working relationship
A properly drafted NDA should reflect what is actually happening on the ground, rather than relying on standard wording that may not fit.
How NDAs protect business value
Whether you are exploring a new partnership, bringing in investment, outsourcing key work or preparing for a sale, the right confidentiality framework helps you stay in control of your information while moving negotiations forward.
If you would like advice on putting the right NDA in place for your business, our team can guide you on the best approach, so please get in touch.
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