A non-disclosure agreement (NDA) is a legal agreement between two or more parties that outlines confidential information that the parties wish to share with one another for certain purposes, but wish to restrict access to by unauthorised third parties. It is designed to protect sensitive information from being shared to others without proper authorisation.

A NDA can also be called a 'confidentiality agreement' and can be useful in several business situations. These include:

• When a company wants to keep its sensitive information safe and prevent employees or contractors potentially sharing it with competitors.
• When a company needs to share confidential details with potential partners or advisors like investors, manufacturers or marketing agencies.
• During the sale of a business or product, if the potential buyer or investor requires more information but confidentiality is crucial.

Bear in mind that recent case law demonstrates there are limitations to the uses of NDAs and in some cases their use may not be appropriate or necessary. For example, accountants should ensure the NDA does not prevent them from complying with their legal and professional obligations. If you are an ICAEW member, affiliate or member of staff in an eligible firm with member firm access, you may discuss your specific situation with the Ethics Advisory Service on +44 (0)1908 248 250.

The agreement should clearly set out the obligations of the parties involved in preserving confidential information, to prevent misunderstanding and clarify where responsibilities lie.

Although no single NDA will be exactly the same, most agreements will cover the following aspects:

The parties involved

• Clearly state which individuals and / or entities are party to the agreement

How confidential information should be defined

• This could be a general definition or a list of specific types of information. Any types of information not covered by the agreement can also be specified.

Who is authorised to disclose and have access to the information

• Specify who can share and access the confidential information. There may be a need for additional parties, such as professional advisers, to access the confidential information. Consider whether it is practical to limit this to named individuals.

The purpose for which confidential information may be used

• State the permitted uses of the confidential information. There may need to be a clause to prevent the recipient from using confidential information for any reason other than the purposes of the agreement.

How to handle the confidential information

• The disclosing party may require the recipient to take particular security measures to protect the information. Set out where the information will be stored and whether copies of the information are permitted.

Duration and termination

• Confirm the agreement's duration and conditions for termination. Use specific and realistic criteria when listing potential causes of termination of the agreement. Decide on the amount of termination notice required and whether both parties will have the right to terminate.

Looking to create your own agreement?

The ICAEW Library & Information Service can provide example standard non-disclosure agreements and agreement checklists from authoritative sources. See our Document supply page for information on how to request model documents from us.

Below are some examples of the resources we have available:

Contact the Library enquiry team on +44 (0)20 7920 8620 or email library@icaew.com to request documents or get help with research. The service is free for ICAEW members, ACA students and other permitted users.

To find out how you can borrow books from the Library please see our guide to borrowing books.

You can obtain copies of articles or extracts of books and reports through our document supply service.