What is a Confidentiality Agreement (or Non-Disclosure Agreement)?

kamfaulkner
Oct 1
3 min read

When you’re buying or selling a business, one of the first legal documents you’ll come across is the confidentiality agreement, also known as a non-disclosure agreement (NDA). But what exactly is it, why does it matter, and should you have one in place?

What is a confidentiality agreement?

A confidentiality agreement is a contract where one (or both) parties agree to keep certain information secret. In the context of selling a business, that usually means the seller agrees to share sensitive financial and commercial information with a prospective buyer, and the buyer agrees not to misuse or disclose it to anyone else.

The terms confidentiality agreement and non-disclosure agreement (NDA) are used interchangeably. Both mean the same thing.

Why does it matter when selling a business?

Selling a business almost always involves sharing information you’d rather competitors, suppliers, customers, or employees didn’t see some things.

Things like:

Financial accounts and forecasts.
Customer and supplier contracts.
Pricing structures and margins.
Employee details.
Commercial strategies.

If this information leaked, it could damage your business, unsettle staff, or weaken your negotiating position. An NDA gives you a contractual safeguard: if the buyer misuses the information, you have legal remedies available.

What does an NDA usually cover?

Although each deal is different, a typical confidentiality agreement will include:

Typical core parts of a non-disclosure agreement

What if there’s no NDA?

Even without a contract, English law does provide some protection through the common law duty of confidence. If information is clearly confidential, the courts can stop it being misused.

But relying on unwritten protections is riskier. An NDA makes the rules clear from the outset, avoids arguments about what was confidential, and strengthens your position if you need to enforce your rights.

Is it always one-way?

Most NDAs in business sales are one-way, favouring the seller (who is usually disclosing the information). But sometimes they are mutual. For example, if the buyer is paying with its own shares, the seller may also need to see sensitive information about the buyer.

Practical steps for sellers

Signing an NDA isn’t the end of the story. To protect yourself:

A checklist to help protect sellers when using confidentiality agreements

What remedies exist if an NDA is breached?

If a buyer breaches the agreement, you may be able to seek:

An injunction; to stop them disclosing or using the information further.
Damages; financial compensation for your losses.
Account of profits; handing over profits the buyer made from misusing the information.

That said, prevention is better than cure. Once information is in the public domain, no remedy can make it secret again.

Should you have a confidentiality agreement when selling your business?

In almost every case, yes. An NDA won’t guarantee that your information stays secret, but it’s a vital first step in protecting your position. It also sends a clear message: the information is valuable, and misuse will have consequences.

Quick checklist for sellers

Always insist on an NDA before sharing sensitive information.
Define confidential information clearly.
Limit use to evaluating the deal.
Control who can see the information.
Require return or destruction if the deal doesn’t proceed.
Keep disclosure records.

Next steps

If you’re considering selling your business, or you’re a buyer being asked to sign an NDA, it’s worth getting legal advice before signing. The terms can vary, and small differences may have big consequences.

To chat through your plans, get in touch now

📩 info@orbitlegal.co.uk | 📞 0115 6777095 |

Disclaimer

This content is for general information only and doesn’t constitute legal, accounting, financial, or tax advice. It’s based on the law of England & Wales and was correct at the date of publication, but the law and guidance can change. Reading this page doesn’t create a solicitor–client relationship with Orbit Legal. Please take advice on your specific circumstances before acting. Get advice for your situation by contacting Orbit Legal at info@orbitlegal.co.uk or 0115 6777095.