Non-disclosure agreement (NDA)
Learn what a non-disclosure agreement (NDA) is, the main types, and how NDAs work in Hong Kong.
February 2024 | Published by Xero
Published Thursday 6 August 2026
Table of contents
Key takeaways
- A non-disclosure agreement (NDA) is a contract that stops the people who sign it from sharing named confidential information with anyone outside the agreement.
- NDAs can be one-way, mutual or multilateral, and they usually define the confidential information, the permitted use, how long the duty lasts, and what happens if it is broken.
- In Hong Kong an NDA is often called a confidentiality agreement, and it is generally enforceable when the terms are clear and the scope and duration are reasonable.
- A poorly drafted NDA may not hold up, so it is worth working with a qualified lawyer before you sign or ask someone else to.
What is a non-disclosure agreement?
A non-disclosure agreement (NDA) is a legally binding contract that stops the people who sign it from sharing confidential information with anyone outside the agreement. It protects things like financial information, intellectual property and business data by committing every signatory to keep the named information private.
An NDA spells out exactly what information, or type of information, is covered. Because it removes ambiguity about what is protected, it also gives both sides the confidence to speak openly. Businesses often sit an NDA alongside other safeguards such as registering a trade mark to protect a brand or product.
Types of NDA
NDAs vary by how many parties share confidential information and in which direction it flows. The three common forms are:
- unilateral (one-way): only one party discloses confidential information and the other agrees to protect it, common when hiring an employee or a contractor
- mutual (two-way): both parties share confidential information and both agree to protect what they receive, common in partnerships and joint ventures
- multilateral: the less common form, where three or more parties are involved and at least one discloses information the others must protect, which avoids signing several separate agreements
What's usually included in an NDA
A clear NDA leaves little room for argument about what is protected and for how long. Most agreements set out:
- the parties: who is disclosing information and who is receiving it
- the confidential information: a precise definition of what is covered
- the permitted use: what the receiving party may do with the information
- the obligations: how the information must be kept safe
- the exclusions: information that is not covered, such as anything already public
- the duration: how long the duty of confidentiality lasts
- the remedies: what happens if the agreement is broken
Examples of when businesses enter into NDAs
NDAs come up whenever sensitive information needs to change hands. Here are three situations where a business might ask for one or be asked to sign.
One party asks another to sign an NDA
A business may be asked to sign an NDA before it receives sensitive information from a customer or collaborator, or it may ask another person or organisation to sign one before sharing information. For example:
- a drinks company that has to share its recipe with a contract manufacturer will first secure an NDA to protect its intellectual property
- a direct mail business may need to sign an NDA before a charity shares its mailing list of high-profile donors
NDAs in negotiations
Before agreeing a deal, two businesses may sign an NDA so they can see each other's financial information. A manufacturer and a distributor, for instance, may need to understand each other's financial models to weigh up the risks and returns of a partnership. The same protection often applies during due diligence when buying a business or when pitching to angel investors.
NDAs in operating partnerships
Two organisations may need an NDA to deliver a project together. A non-profit might partner with a tech company to build a government-funded app, and they would sign an NDA so they can share data and insights with each other throughout the work.
What it means when a business signs an NDA
By entering an NDA, signatories agree not to share certain information with anyone outside the agreement. Breaking it can carry legal consequences, so it pays to understand exactly what you are signing up to.
A business that signs an NDA can usually share the protected information with its lawyer, accountant or another agent. It stays responsible if that agent leaks the information, so the NDA needs to make everyone's obligations clear. To stay compliant, be careful about how and where you record protected information, which is one reason strong cloud security matters when confidential financial statements are involved.
NDA vs confidentiality agreement and non-compete
These terms are easy to mix up, so it helps to keep them apart:
- NDA and confidentiality agreement: in Hong Kong these mean the same thing, a contract that protects shared information from being disclosed
- non-compete agreement: this restricts someone from competing with a business for a set time and area, rather than protecting confidential information
Are NDAs enforceable in Hong Kong?
Yes. In Hong Kong an NDA is a binding contract under common law, and it is generally enforceable when the terms are clear and the scope and duration are reasonable. An agreement that is vague or unreasonably wide can be harder to enforce.
If an NDA is broken, the disclosing party can typically ask the Hong Kong courts for remedies such as damages or an injunction to stop further disclosure. Because enforceability depends so much on the wording, it is worth working with a qualified lawyer, as a poorly written agreement may not stand up.
Protect your business information with Xero
An NDA protects the information you share, and good habits protect the records behind it. With Xero, your financial data sits in one secure place with bank-level encryption, so it stays organised and accessible only to the people you choose. Sign up to get one month free and keep your business information safe and in order.
FAQs on non-disclosure agreements
Here are quick answers to some common questions about NDAs.
How long does an NDA last?
An NDA lasts for the period written into the agreement, often between three and five years, though some cover trade secrets indefinitely. The term should be reasonable for the information involved, as an unreasonably long period can be harder to enforce.
Can you refuse to sign an NDA?
Yes, signing an NDA is voluntary, and you can decline or ask to change terms you are not comfortable with. Keep in mind that the other party may then hold back the information or opportunity that prompted the request.
Do you need a lawyer to draft an NDA?
You are not required to use a lawyer, but professional drafting helps make sure the agreement is clear and enforceable. This matters most when the information is valuable or the relationship is complex.
Can an NDA be enforced against former employees?
Yes, an NDA can continue to bind a former employee after they leave, as long as its terms are clear and reasonable. Overly broad restrictions that stop someone earning a living are more likely to be challenged.
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.